LJUBLJANA (Slovenia), February 22 (SeeNews) – Continued structural reforms are key to ensuring long-term prosperity in Slovenia, while strengthening the economy’s resilience to shocks, the International Monetary Fund (IMF) said.
“Effective implementation of the recently enacted reforms of vocational training, apprenticeship, and adult education would help address skill shortages, support employment of younger and older people, and boost productivity growth,” the IMF said in a statement earlier this week, following the conclusion of Article IV consultations.
According to the IMF, a broad-based recovery continued in 2018 (4.5% growth of GDP projected), lowering unemployment, swinging the headline fiscal balance into surplus, and reducing the public debt ratio.
“Growth is expected to slow moderately to 3.4% in 2019, and risks remain tilted to the downside, notably related to a rise in protectionism, political and policy uncertainty in Europe,” the statement noted, adding that a projected fiscal expansion will support domestic demand in 2019.
IMF projects that inflation will reach 2.2%, driven by still strong economic activity and wage pressures.
The medium-term outlook is less favorable as the rapidly aging population will reduce potential growth.
“Risks are titled to the downside. Major risks include trade protectionism, uncertainty in Europe, and weaker-than-expected global demand,” the IMF said, adding that the authorities’ reform agenda is geared toward rebuilding macroeconomic buffers and promoting long-term growth through structural reforms.
“There is scope for fiscal reforms that generates permanent savings while modernizing government operations,” the Fund noted, adding that these reforms would help mitigate the medium-term fiscal impact of the unfavorable demographic outlook. “They should focus on pensions, health, education, and the wage bill.”
IMF also said financial stability has improved, thanks to the decisive restructuring of ailing banks and prudent macroeconomic policies.
“Emerging risks in the housing market need enhanced vigilance. Although the relatively low price-income ratio does not point to any overheating yet, the recent double-digit increases in housing prices warranted close monitoring,” the statement noted.