background · background • benchmarking exercise, using publicly available data • applying the...

Background

• Benchmarking exercise, using publicly available data

• Applying the methodology we discussed this morning

• Comparators: Portugal, Lithuania, Slovenia

• Preliminary findings, to help you identify sectors in which

efficiency gains could be achieved

• A menu of sectors/spending to choose from

2

Outline

• Expenditure policy in Slovakia

• Public investment

• Education

• Health

• Social protection

3

Expenditure Policy

Rising but Still Low Public Expenditure

But public expenditure remains

relatively low

5

General Government Expenditure

(in percent of GDP)

Real Primary Expenditure Growth, 2007-2014

(in percent of GDP)

Sources: EUROSTAT and IMF staff calculation

30

32

34

36

38

40

42

44

46

48

50

Po

rtu

gal

Slo

ven

ia EU

Germ

an

y

Slo

vakia

UK

Irela

nd

Est

on

ia

Latv

ia

Lit

hu

an

ia

Spending increased sharply during the

crisis, and has not declined since then

EU(28)EA(19)

BEL

BGR

CZEDNKDEU

EST

GRC

ESP

FRA

HRVITA

CYP

LVA

LTU

LUXHUN

MLT

NLD

AUTPOL

PRT

ROM

SVN

SVKFINSWE

GBR

NOR

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

-4 -2 0 2 4 6 8

20

10

-14

2007-10

Sources: WEO and IMF staff calculations

-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

030

35

40

45

50

55

Slovakia Slovenia Lithuania Portugal

2014 2018 Change 2014-18 (In percent, RHS)

Small and Untargeted Cuts May Prove

Insufficient to Reach Expenditure Targets

High selectivity during the crisis low

selectivity afterwards

Expenditure reform will be needed to

meet the 2015 Stability program targets

6

Selectivity in Spending Cuts/Increases

(index)

Expenditure targets

(Change over 2014-2018, in ppts of GDP)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Portugal Ireland Czech Rep. Slovenia Slovak Rep. Germany Average EU-17

Stimulus 2007-10 Consolidation 2010-13

Source: European Commission and IMF staff

calculations.

Source: OECD and IMF staff calculations.

Note: The indicator equals 0 when spending

variations are identical for all spending categories.

Allocation Across Sectors Differs

Significantly from the EU Average

7

Higher spending on public safety and order, lower on economic affairs, and social

protection

Economic and functional classifications’ matrix, Slovakia vs. EU average

(in percent of GDP)

Total

expenditure

Current

spending

Compensation

of employees

Goods and

services

Interest

payments Subsidies

Current

transfers Social benefits

Grossed

fixed capital

formation

Total expenditure 41.0 37.4 8.5 5.2 1.9 1.0 1.7 18.9 3.0

General public services 5.5 4.6 1.4 0.8 1.9 0.0 0.4 0.1 0.8

Defence 1.3 1.3 0.7 0.4 0.0 0.0 0.0 0.1 0.0

Public order and safety 3.3 2.8 1.7 0.8 0.0 0.0 0.0 0.3 0.4

Economic affairs 3.3 2.6 0.4 0.9 0.0 0.9 0.2 0.1 0.5

Environment protection 0.9 0.6 0.1 0.4 0.0 0.1 0.0 0.0 0.3

Housing and community amenities 0.7 0.4 0.0 0.2 0.0 0.0 0.1 0.1 0.4

Health 7.5 7.3 0.2 0.2 0.0 0.0 0.0 6.9 0.0

Recreation, culture and religion 1.3 1.0 0.3 0.4 0.0 0.0 0.2 0.0 0.3

Education 5.0 4.7 2.9 1.1 0.0 0.0 0.6 0.1 0.3

Social protection 12.3 12.3 0.7 0.1 0.0 0.0 0.2 11.3 0.1

Sources: EUROSTAT and IMF staff calculations

Controlling for Income Points to Some

Inefficiencies

Relatively high social benefits… And health spending

8

Health spending, controlling for income

(in percent of GDP, and PPP USD per capita)

Social benefits, controlling for income


BGR

EST

HRV

LVA

CZE

HUN

POL

ROM

SVK

AUTBEL

CYP

DNKFIN

FRA

GER

GRC

IRLITA

MLT

NLD

ESP

SWE

GBR

LTU

PRT

SVN

3

8.1

6 16.2 43.74

He

alth

Exp

en

dit

ure

(P

erc

en

t o

f G

DP

)

GDP Per Capita (Thousands US Dollars)

Slovakia

Comparators

Source: EUROSTAT and IMF staff calculations.

Health , controlling for income


EST

HRV

LVA

CZE

HUNPOL

AUT

BEL

CYP

DNK

FIN

FRA

GER

GRC

IRL

ITA

MLT

NLD

ESP

SWE

GBR

SVK SVN

LTU

PRT

10.0

27.0

12 32.4

Soci

al b

en

efi

ts (

Pe

rce

nt

of

GD

P)

ln GDP Per Capita (Thousands US Dollars)

Slovakia

Comparators

BGR

LTU

EST

HRV

LVA

ROM

SVK

SVN

AUTBEL

CYP

DNKFIN

FRA

GER

GRC

IRLITA

MLT

NLD

PRT

ESP

SWE

GBRCZE

HUNPOL

2.7

7.29

7.3 19.71 53.217

He

alt

h E

xpe

nd

itu

re (

Pe

rce

nt

of

GD

P)


Slovakia

Comparators

Low Public Wage Bill and Employment,

except in the Public Order Sector

Slovakia compares favorably for

public employment and wages…

SVK

BEL

GER

GRC

FRA

ITA

CYP

LUX

MLT

NLD

FIN

LVA

BGR

CZE

HUN

LTU

PRT

SVN

10

12

14

16

18

20

22

24

5 7 9 11 13 15

Go

vern

me

nt

em

plo

yme

nt,

pe

rce

nt

of

lab

or

forc

e

Wage bill, percent of GDP

Slovakia

Comparators

Except for the number of police

officers

GBR

AUT

BEL

DNK

FRA

GER

ITA

LUX

NLD

SWE

FIN

GRC

IRL

MLTPRT

ESP

CZE

SVK

ESTLVA

HUN

LTU

HRV

SVN

POLROM

100

150

200

250

300

350

400

450

500

550

100 150 200 250 300 350 400 450 500 550

20

12

2003

9

General Government Wages and

Employment, 2013 or most recent

(in percent of GDP and labor force)

Police Personnel per 100.000 inhabitants,

2003-2012

Source: EUROSTAT and IMF staff calculations.

Preliminary Conclusions

• Slovakia does not overspend relative to peers and

EU average

• But spending pressures due to relatively low social

outcomes (education and health) and ageing

• Spending has proven difficult to contain since the

crisis

• Overall, the wage bill appears reasonable, but a

sectoral analysis is needed

10

Public Investment

1/ Inputs: Low Capital and Current Spending

Slovakia compares favorably in

terms of composition of spending

However, investment has been

persistently low

12

General government investment, in constant

2005 international dollars

(in percent of GDP)

Current vs. Capital Spending

(in percent of GDP)

AUT

BEL

CYP

DNK

FINFRA

GER

GRC

IRLITA

LUX

MLT

NLD

ESP

SWE

GBR

BGR

HRV

CZE

EST

HUN

POL

0

1

2

3

4

5

6

7

30 35 40 45 50 55 60

Gro

ss f

ixe

d c

apit

al f

orm

atio

n

Current spending, 2014

Source: IMF Investment and Capital Stock

Dataset, 2015

Source: EUROSTAT.

Note: Dashed lines indicate medians.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

Slovak Republic European Union

2/ Outcomes: Relatively Inefficient Public

Investment

Infrastructure quality is below

advanced countries’ average

As well as public investment

efficiency

13

Perception of Infrastructure Quality, 2006-

2014

(Infrastructure Quality Index, scale 1-7)

3

4

5

6

2006 2007 2008 2009 2010 2011 2012 2013

Infr

astr

uct

ure

Qu

alit

y (S

cale

: 1

-7

)

Slovak Republic Advanced Economies

Public Investment Efficiency (PIE-X)

(Hybrid indicator)

0.0

0.2

0.4

0.6

0.8

1.0

ADV

{n=26}

All Countries

{n=114}

Eff

icie

ncy s

co

res

Mean Slovak Republic

Average Efficiency

Gap of 27%

Average Efficiency

Gap of 13%

Source: Center for International comparison

(2013), WEF, OECD, WDI (2014), and IMFSource: World Economic Forum

3/ Composition: Low Capital Stock and

Poor Composition

Slovakia has a low level of public

capital stock…

… Which is insufficiently geared

toward economic infrastructures

14

Public Capital Stock by Function, Average of

the Last 20 years

(in percent of public capital stock)

Comparison of Public Capital Stock

(in percent of GDP, PPP adjusted)


Dataset, 2015


Dataset, 2015

25.94

33.36

52.70

56.28

47.74

59.30

34.29

53.90

53.20

32.64

60.24

49.15

32.90

33.33

0 50

Slovak Republic

Lithuania

Estonia

Portugal

Czech Republic

Ireland

United Kingdom

Greece

Croatia

Serbia

Italy

Bulgaria

Belgium

Austria

31.2%

41.7%

1.3%

25.7%

Economic infrastructure1 Social2 Defense Other3

Preliminary Findings

• Low quantity of capital stock calls for additional

investment spending

• Because low economic infrastructure may hinder

output growth

• Any scaling up of public investment should be

accompanied by improvement in PIM so that

Slovakia can reap the maximum benefits from its

spending

15

Education

1/ Inputs: Low Public Spending

Relatively low public spending in

education in percent of GDP…

…And per student

17

Spending per Secondary Students, 2011

(in PPP USD)

BGR

EST

HRV

LVA

CZE

HUN

POL

SVK AUT

BELCYP

DNK

FIN

FRA

GERGRC

IRLITA

MLT

NLD

ESP

SWE

GBR

LTU

PRT SVN

3

3.5

4

4.5

5

5.5

6

6.5

7

7.5

8

6 16.2 43.74

Edu

cati

on

Exp

en

dit

ure

(P

erc

en

t o

f G

DP

)


Slovakia

Comparators

Education Spending, 2013

(in percent of GDP, and PPP USD per capita )

Source: UNESCO.Source: EUROSTAT.

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Slovakia Lithuania Slovenia Portugal EU average

2/ Outputs: Low Performance and Equity

Education performance is

relatively low…

…and education outcomes are

deteriorating both in quality and

equity

18

Change in Performance and Equity

(in percent)

Source: OECDSource: OECD

2012 PISA Scores

(index)

Germany

Netherlands

Sweden

Belgium

Austria

Czech Republic

Denmark

Finland

France

Greece

Hungary

Ireland

Italy

LuxembourgNorway

Poland

Portugal

Slovak Republic

Spain

Latvia

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

-10 0 10

An

nu

aliz

ed

ch

ange

in m

ath

em

atic

s p

erf

orm

ance

Change in the percentage of variation in mathematics performance explainedby the PISA index of economic, social and cultural status (2003- 2012)

Equity deterioratedEquity improved

Perfo

rman

ce d

eterio

rated

Perfo

rman

ce im

pro

ved

440

450

460

470

480

490

500

510

PISA total PISA math PISA science PISA reading

Sco

re

EU Average Comparator average

2/ Outputs: Students Appear Relatively Well

Prepared for Entering the Job Market

Close to EU best performers for

graduates specialization…

… And for matching labor market

needs

19

Percentage of Graduates from tertiary

programs by Study Field

(in percent)

Education-Occupation Mismatch of

Persons aged 25-34 by Study Field

(in percent)

0

10

20

30

40

50

60Education

Humanities and Arts

Social Sciences, Business andLaw

Science

Engineering, Manufacturingand Construction

Agriculture

Health and Welfare

Services

Slovakia

EU-10 average

0

5

10

15

20

25

30

35

40

Education

Humanities and arts

Social sciences, businessand law

Science, mathematics andcomputing

Engineering,manufacturing and

construction

Agriculture and veterinary

Health and Welfare

Services

Slovakia

EU-10 average

Source: UNESCO

3/ Composition: Low wages and Employment,

but Inefficiencies

High student-teach ratio, but low

average size class, pointing to

organizational inefficiencies

Teachers’ wages are particularly

low in Slovakia

20

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

EU21 Average Slovakia Slovenia Portugal Czech

Republic

Primary education Lower secondary education

Upper secondary education

Teachers’ Statutory Salaries, 15 years of

experience

(in PPP USD)

Source: OECD.Source: UNESCO.

Education Inputs

(in number of persons, and in percent of total

expenditure)

0

1

2

3

4

5

6

0

5

10

15

20

25

Pri

mar

y

Seco

nd

ary

Tert

iary

Pri

mar

y

Seco

nd

ary

Pri

mar

y

Seco

nd

ary

Tert

iary

Student-teacher ratio(2012, LHS)

Average class size(2012, LHS)

Total Public Expenditure, percentGDP

(2012, RHS)

Pe

rce

nt

Pe

rso

ns

Source: UNESCO.

3/ School network consolidation will be

needed given shrinking school-age population

Students population will decrease

sharply in Slovakia

55

65

75

85

95

105

115

2013 2020 2025 2030 2035 2040 2045 2050 2055 2060

European Union Slovakia Portugal Lithuania Slovenia

21

Change in the Number of Students, 2013-

2060

(2013=100)


• Slovakia spends less on education, and its

outcomes are below comparators

• Additional spending may not be needed, given the

expected shrinking of students’ population

• Focusing on tackling inefficiencies to improve

education outcomes, while gradually consolidating

school network

• This may leave room to increase wages in order to

raise teaching quality

22

Health

0

1

2

3

4

5

6

7

8

9

10

19

97

199

8

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

201

2

20

13

% o

f G

DP

YearSlovak Republic, Total spending Slovak Republic, Public spending

Slovak Republic, Private spending EU Average, Total spending

EU Average, Public spending EU Average, Private spending

Slovak RepublicLithuania

Portugal

Slovenia

0.0

1.0

2.0

3.0

4.0

5.0

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0

Pri

vate

Sp

end

ing

Public Spending

Slovak Republic Comparators

1/ Inputs: High Private Spending, but

Low Public Spending

Private spending in line with EU

average, but lower public spending

Rising health spending,

particularly private

24

Public and Private Spending

(in percent of GDP, average of 3 latest years)

Health Expenditure Trends

(in percent of GDP)


2/ Outcomes: Relatively Poor Health

Outcomes

Low Health Adjusted Life (HALE)

relative to total health spending

And high loss in HALE due to

inefficiencies

25

Total Health Spending and HALE, 2013

(in years, and in per-capita spending in

current PPP US$)

Public Health Spending and Health, 2013

(in years, and in per-capita spending in

current PPP US$)


60

65

70

75

80

0 2,000 4,000 6,000

Hea

lth

Ad

just

ed L

ife

Exp

ecta

ncy

Total health spending per capita

Slovak Republic Comparator

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

HU

N

SV

K

DN

K

DE

U

NLD

SV

N

GB

R

HR

V

BE

L

CZ

E

LUX

BG

R

PO

L

IRL

AU

T

LTU

SW

E

GR

C

MLT

RO

U

FIN

FR

A

CY

P

LVA

ITA

PR

T

ES

T

ES

P

2/ Outcomes: Relatively Poor Performance

26

Mixed Health Outcomes

Source: WHO

0

5

10

15

20

25

30

35

40

45

50

Crude deathrate per

1000population

Infant deathsper

1000 livebirths

Maternaldeaths per

100 000 livebirths

Trachea/bronchus/

lung cancer

Breast cancer Suicide

Slovakia

EU Average

Comparators

0

50

100

150

200

250

300

350

400

450

500

Diseases of circulatory

system(RHS)

Ischaemicheart

disease(RHS)

Allcancers(RHS)

Externalinjuries/

poisoning(RHS)

Acoholrelated(RHS)

Smokingrelated(RHS)

Health Outcomes relative to EU and comparators averages, 2012 or most recent and (LHS:

per 1000 population, RHS: Standard Death Rate, all ages, per 100,000 people)

3/ Composition: Both classifications of

spending raise questions

Composition of spending And high loss in HALE due to

inefficiencies

27

Economic Classification, 2013

(in percent of GDP)

Functional Classification, 2013

(in percent of GDP)


0.0

0.1

0.2

0.3

0.4

0.5

Medicalproducts,

appliances andequipment

Outpatientservices

Hospitalservices

Other

Slovak Republic EU Average

0.0

1.0

2.0

3.0

4.0

5.0

Compensation ofemployees

Goods and services

Social benefitsOther current

Capital spending


0.00

2.00

4.00

6.00

8.00

10.00Hospitals

Hospital beds

Physicians

Nurses

Average lengh ofstay

Share of generics


3/ Composition: Efficiency may be improved,

and Out-of-Pocket Spending is Large

Inputs indicators are relatively

favorable, but high for hospitals

… and high out-of-pocket spending

28

Health Inputs Indicators relative to EU

average, 2013

(in percent of GDP)

Private Health Expenditure

(in percent of GDP, and of total expenditure

on health)

Source: OECD, World BankSource: WHO, OECD

Note: scales have been normalized.

2.0 2.1

22.4

18.4

0.0

5.0

10.0

15.0

20.0

25.0

Slovak Republic EU Average Slovak Republic EU Average

Private Health Spending, % of GDP Out-of-pocket health expenditure(% of total expenditure on health)


• Further analyze classifications of health spending

• Already high out-of-pocket spending calls for

caution in cutting public spending

• Again, efforts should focus on tackling inefficiencies

to improve health outcomes, and to mitigate the

projected increase in health spending

29

Social Protection

BGR

EST

HRV

LVA

CZE

HUNPOL

ROM

SVK

AUT

BEL

CYP

DNKFINFRA

GERGRC

IRL

ITA

MLT

NLDESP

SWE

GBR

LTU

PRTSVN

10

12

14

16

18

20

22

24

26

6 16.2 43.74

Soci

al P

rote

ctio

n E

xpe

nd

itu

re (

Pe

rce

nt

of

GD

P)


Slovakia

Comparators

1/ Inputs: Comparatively Low Social

Protection Spending

Low social protection spending Due to low pension spending, but

that is expected to rise

31

Public and Private Pension Expenditure,

2011

(in percent of GDP)

(in percent of GDP)

Source: OECD.

Note: Excluding disability, and early retirement.

Source: EUROSTAT.

Public Social Protection Spending

(in percent od GDP, and PPP USD per capita)

0

2

4

6

8

10

12

14

EST

IRL

AU

S

SV

K

SV

N

CZ

E

HU

N

PO

L

EU

(21)

BEL

GR

C

AU

T

PR

T

Public Private

2/ Outcomes of Income Support Programs

Relatively low market and

disposable income inequalities

And limited risk of poverty

HUN

BEL

DEUFRA

AUT

FINSWE

DNK

IRL

LUX

GBR

ITA

NLD

GRC

MLT

ESP

CYP

CZE

ROM

POL

BGR

EST

LVA

SVK

LTU

PRT

SVN

0.2

0.25

0.3

0.35

0.4

0.45

0.5

0.55

0.6

0.2

0.2

5

0.3

0.3

5

0.4

0.4

5

0.5

0.5

5

0.6

Dis

posa

ble

In

com

e G

ini

Market Income Gini

Slovakia

Comparators

Low Fiscal Redistribution

High Fiscal Redistribution

32

Market vs. Disposable Income Gini, 2013

(in percent)Risk of Poverty rate after social transfers

and pensions, 2013

(in percentage of population under 65 and

over 65)

SVK

BEL

DNK

GER

IRLFRA

CYP

LUX

MLT

NLD

AUTFIN SWE GBR

EST

LVA

BGR

HRV

CZEHUN

POL

PRT

SVN

0

5

10

15

20

25

30

8 10 12 14 16 18 20

Pe

rce

nta

ge o

f p

op

ula

tio

n 6

5+

Percentage of population under 65

Slovakia

Comparators

Source: EUROSTAT.

Note: Low (high) fiscal redistribution refers to the difference between market and disposable income

Gini being less (greater) than 0.2.

3/ Fiscal Redistribution by instruments

33

Fiscal redistribution is mainly achieved through pension spending, while taxes play

a smaller role

Contributions to Fiscal Redistribution in Europe, 2013

(Reduction in Gini)

Sources: EUROMOD and IMF staff estimates.

-0.05

0

0.05

0.1

0.15

0.2

0.25

0.3

Ire

lan

d

Be

lgiu

m

Ger

man

y

Hu

nga

ry

Au

stri

a

Fin

lan

d

Luxe

mb

ou

rg

Fran

ce

Cze

ch R

epu

blic

Slo

ven

ia

Po

rtu

gal

EU-2

7

Un

ite

d K

ingd

om

Ital

y

Swed

en

Slo

vaki

a

Spai

n

Ro

man

ia

De

nm

ark

Gre

ece

Po

lan

d

Esto

nia

Lith

uan

ia

Latv

ia

Mal

ta

Net

her

lan

ds

Bu

lgar

ia

Cyp

rus

Pensions NMT MT DT SC Average total impact Average from transfers Average from taxes

Average total impact = 0.200

Average from taxes = 0.044

Average from transfers = 0.156

3/ Fiscal Redistribution by Instruments

34

Fiscal redistribution is mainly achieved through pension spending, while taxes play

a smaller role

The Redistributive Power

of Public Spending

(Reduction of the GINI

coefficient due to 1 percent

of GDP of social benefits)

Sources: EUROMOD and IMF staff estimates.

0.000

0.001

0.002

0.003

0.004

0.005

0.006

0.007

0.008

0.009

0.010

0.011

0.012

0.013

0.014

0.015

Ro

man

ia

Hu

nga

ry

Irel

and

Esto

nia

Lith

uan

ia

Latv

ia UK

Mal

ta

Po

lan

d

Swed

en

Cze

ch R

epu

blic

Bu

lgar

ia

Slo

vaki

a

Fin

lan

d

Den

mar

k

Luxe

mb

ou

rg

Slo

ven

ia

Spai

n

Ger

man

y

EU-2

7

Au

stri

a

Cyp

rus

Gre

ece

Po

rtu

gal

Ital

y

Be

lgiu

m

Fran

ce

Net

her

lan

ds

3/ Composition: Share of Means-Testing

35

Means-testing in social protection is comparatively low in Slovakia

Share of Means-tested

Social Expenditures in

Europe, 2010

(in percent of social

benefits, and in percent of

GDP)

Sources: EUROSTAT

Denmark

France

Netherlands

Sweden

Finland

Austria

Germany

Italy

Belgium

Greece

United Kingdom

Portugal

Spain

Luxembourg

Cyprus

Malta

Serbia

Lithuania

Bulgaria

Czech Republic

Estonia

Croatia

Latvia

Slovenia

Slovakia

HungaryPolandRomania

0%

2%

4%

6%

8%

10%

12%

14%

16%

10 15 20 25 30 35

Shar

e o

f M

ean

s te

sted

sp

end

ing,

%

Total social protection spending, % GDP


• Low social protection spending, but relatively low

inequalities and risk of poverty

• … Due to low market income inequalities, and

relatively good redistributive power of social

benefits

• However, better targeting would be needed in case

of additional social assistance spending, and to

make fiscal space for rising pension spending

36

Thank you

37

background · background • benchmarking exercise, using publicly available data • applying the...

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