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  • 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

    P o

    rt u

    g a l

    S lo

    v e n

    ia E U

    G e rm

    a n

    y

    S lo

    v a k ia

    U K

    Ir e la

    n d

    E st

    o n

    ia

    L a tv

    ia

    L it

    h u

    a n

    ia

    Spending increased sharply during the

    crisis, and has not declined since then

    EU(28) EA(19)

    BEL

    BGR

    CZE DNK DEU

    EST

    GRC

    ESP

    FRA

    HRV ITA

    CYP

    LVA

    LTU

    LUX HUN

    MLT

    NLD

    AUT POL

    PRT

    ROM

    SVN

    SVKFIN SWE

    GBR

    NOR

    -6

    -5

    -4

    -3

    -2

    -1

    0

    1

    2

    3

    4

    5

    -4 -2 0 2 4 6 8

    2 0

    1 0

    -1 4

    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

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

    BGR

    EST

    HRV

    LVA

    CZE

    HUN

    POL

    ROM

    SVK

    AUTBEL

    CYP

    DNK FIN

    FRA

    GER

    GRC

    IRLITA

    MLT

    NLD

    ESP

    SWE

    GBR

    LTU

    PRT

    SVN

    3

    8.1

    6 16.2 43.74

    H e

    al th

    E xp

    e n

    d it

    u re

    ( P

    e rc

    e n

    t o

    f G

    D P

    )

    GDP Per Capita (Thousands US Dollars)

    Slovakia

    Comparators

    Source: EUROSTAT and IMF staff calculations.

    Health , controlling for income

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

    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

    So ci

    al b

    e n

    e fi

    ts (

    P e

    rc e

    n t

    o f

    G D

    P )

    ln GDP Per Capita (Thousands US Dollars)

    Slovakia

    Comparators

    BGR

    LTU

    EST

    HRV

    LVA

    ROM

    SVK

    SVN

    AUTBEL

    CYP

    DNK FIN

    FRA

    GER

    GRC

    IRLITA

    MLT

    NLD

    PRT

    ESP

    SWE

    GBR CZE

    HUN POL

    2.7

    7.29

    7.3 19.71 53.217

    H e

    a lt

    h E

    xp e

    n d

    it u

    re (

    P e

    rc e

    n t

    o f

    G D

    P )

    GDP Per Capita (Thousands US Dollars)

    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

    G o

    ve rn

    m e

    n t

    e m

    p lo

    ym e

    n t,

    p e

    rc e

    n t

    o f

    la b

    o r

    fo rc

    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

    MLT PRT

    ESP

    CZE

    SVK

    EST LVA

    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

    2 0

    1 2

    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

    IRL ITA

    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

    G ro

    ss f

    ix e

    d c

    ap it

    al f

    o rm

    at io

    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