Slovenia needs reforms to address aging population: government institute

By Marja Novak

LJUBLJANA (Reuters) – Slovenia needs to urgently design a set of reforms to address the fact that its population is aging faster than in most other European Union states, the government’s macroeconomic institute said on Wednesday.

Since the country of 2 million gained independence from the former Yugoslavia in 1991 the percentage of the population of over 65 years of age has risen to 18 percent from about 11 percent and will double in the next three decades, the institute said.

“All European countries are facing the problem of aging but we (Slovenia) are in a small group of countries which have not yet passed decrees that would deal with the aging,” Bostjan Vasle, head of the institute, told an economic conference.

“Further fiscal consolidation is necessary and should be based on decrees that will get rid of structural imbalances,” Vasle said.

He also urged the government to improve management of state firms and speed up privatization, pointing out that state firms are less effective than private ones.

Over the past decades Slovenia has been reluctant to sell its major banks and companies so the government still controls about 50 percent of the economy.

“There is a need for a combination of various decrees that would widely address the problem of aging, problems of productivity and competitiveness,” Vasle said.

In 2013 the government had to pour more than 3 billion euros ($3.4 bln) into propping up the country’s mostly state-owned banks, to avoid having to seek an international bailout.

Slovenia also introduced its latest pension reform in 2013. That will gradually raise the retirement age to 65 by the end of 2019 from 59 at present, but the International Monetary Fund said in March that a new pension reform is needed to raise the retirement age to 67.

The government has said it would prepare a new pension reform in the coming years.

Slovenia, which forecasts 1.7 percent economic growth this year, spends about 4 percent of its GDP on covering the deficit of its national pension system. That weighs heavily as it tries to reduce the hole in its public finances.

Last year it cut its budget deficit to below 3 percent of GDP, as required of euro zone members, for the first time in seven years and aims to reduce it to zero by the end of 2020.

($1 = 0.8857 euros)

(Reporting By Marja Novak; Editing by Susan Fenton)