Enhancing the Growth Enhancing the Growth Potential during the Fiscal Potential during the Fiscal

ConsolidationConsolidation

Ingrid Brocková Ingrid Brocková Permanent Representative of the SR to the Permanent Representative of the SR to the

OECDOECD

Economics University in BratislavaEconomics University in BratislavaNovember 15-16,2012November 15-16,2012

Global Challenges – Context Global Challenges – Context for the Slovak Republicfor the Slovak Republic

Historical context - importance of Historical context - importance of public policies (public policies (www.gapminder.org))

Global challenges – key trends Global challenges – key trends Food for thoughts /questions Food for thoughts /questions

relevant to development in relevant to development in SlovakiaSlovakia

Key TrendsKey TrendsPublic policies matter,...Public policies matter,...

www.gapminder.org Living standard Living standard Life expectancy Life expectancy DemographicsDemographics Emerging powers Emerging powers Globalization Globalization

Economic ChallengesEconomic Challenges

Sustainable public financesSustainable public finances (EU context), fair and (EU context), fair and sustainable tax and spending balance, policy mix sustainable tax and spending balance, policy mix

Financial sector Financial sector – balance between savings and – balance between savings and investment into real economy (separation/regulation investment into real economy (separation/regulation of socially demaging investment banking)of socially demaging investment banking)

RegulationRegulation „ „failure to regulate market failure is a failure to regulate market failure is a failurefailure“, good regulation as an integral part of the “, good regulation as an integral part of the system, not an add-onsystem, not an add-on

Open economies Open economies – open markets and trade, whilst – open markets and trade, whilst managing the social, structural and sequencing managing the social, structural and sequencing impatcs of globalization impatcs of globalization

Social and Environmental Social and Environmental ChallengesChallenges

Social:Social: JobsJobs – how to achieve job-rich growth – how to achieve job-rich growth InequalityInequality – OECD: Divided We Stand and the Jobs Study – OECD: Divided We Stand and the Jobs Study Social Security Social Security – financing the health, education and – financing the health, education and

pension system (HOW?)pension system (HOW?) OwnershipOwnership – the role fo all stakeholders (business – the role fo all stakeholders (business

community, unions, etc.)community, unions, etc.)

Environmental:Environmental: Perfect storm Perfect storm – natural resource scarcity is growing – natural resource scarcity is growing

rapidly, accentuated by increasingly extreme and rapidly, accentuated by increasingly extreme and unpredictable weather events and climate change.unpredictable weather events and climate change.

Energy and environmental securityEnergy and environmental security

Institutional ChallengesInstitutional Challenges

Domestically Domestically -- a dramatic decline in trust in politics, a dramatic decline in trust in politics, public services and democratic institutions at the very public services and democratic institutions at the very same time as an increase in the need for same time as an increase in the need for good good governance governance and and smart government smart government

Internationally Internationally –– a „zero-sum“ rather than „win-win“ a „zero-sum“ rather than „win-win“ mentality to most negotiations (trade, climate, etc). mentality to most negotiations (trade, climate, etc).

Need for more holistic approach - Need for more holistic approach - Behavioural Behavioural Economics and Complexity EconomicsEconomics and Complexity Economics

OECD : New Approaches to Economic ThinkingOECD : New Approaches to Economic Thinking

Sophisticated integration, recognition of Sophisticated integration, recognition of complementarities, inconsistencies, trade-offs, complementarities, inconsistencies, trade-offs, spillovers. spillovers.

Slovak Republic Slovak Republic

EU contextEU context (consolidation effort) (consolidation effort) GoalGoal: Balanced and sustainable economic : Balanced and sustainable economic

growth and employment while to achieve the growth and employment while to achieve the competetiveness; competetiveness; What kind of growth? What kind of growth? Environmentally sustainable? Job rich? Environmentally sustainable? Job rich? Socially inclusive? Socially inclusive?

Focusing on Focusing on policy making policy making and and measuringmeasuring – going beyond the GDP; measuring „– going beyond the GDP; measuring „what what matters“ matters“ (not only trends, but stocks – (not only trends, but stocks – natural and human capital). natural and human capital).

Long-term UnemplLong-term Unemployment oyment

Youth UnemploymentYouth Unemployment

Educational AchievementEducational AchievementAverage of PISA scores in reading, mathematics Average of PISA scores in reading, mathematics

and scienceand science

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80

90

100

110

120

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Direct public funding of Direct public funding of business´s research and business´s research and

developmentdevelopment

Direct public funding of business R&DPercentage of GDP

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0,05

0,10

0,15

0,20

0,25

0,30

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0,40

0,45

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2007-2009¹ 2002-2004²

Structural changes in the Slovak Republic Structural changes in the Slovak Republic ((OECD Going for Growth 2012OECD Going for Growth 2012))

Communication (country specific Communication (country specific approach in implementation of approach in implementation of structural reforms)structural reforms)

The optimal policy mix? Growth The optimal policy mix? Growth friendly? Fiscal consolidation with friendly? Fiscal consolidation with human face, choice of instrumentshuman face, choice of instruments

Long-term vs. short-term impact? Long-term vs. short-term impact?

Priorities supported by indicators

Improve funding and effectiveness of the education system (Roma children, vocational training, student tuition);

Reduce regulatory barriers to competition (administrative burdens, privatization process in network industries, compulsory chamber membership); Regulatory Impact Assessment (RIA);

Eliminate barriers to female labour participation (parental leave, remove fiscal disincentives to work for second earners);

Reduce the implicit taxes on continued work at older ages (index the retirement age to life expectancy and make pension adjustment for earlier and later retirement more actuarially neutral);

Priorities supported by indicators

Improve activation policies (capacity of PES, tighten conditionality requirements for jobseekers, target job creatino subsidies more narrowly);

Improve the innovation support framework (reduce administrative burdens on start-ups, access to the VC and ICT, public funding of R&D, R&D framework);

Strengthen the judicial and law enforcement systems (accountability – performance indicators and court statistics).

OECD Economic Survey – Slovak Republic 2012

Improving the fiscal framework to enhance growth in an era of fiscal consolidation

Investing efficiently in education and active labour market policies

Secretary General of the OECD, December 6, 2012 in Slovakia

Thank you for your attention

The Permanent Delegation of the Slovak Republic to the OECD

www.oecdparis.mfa.sk