Slovenia was urged today to ensure that the nominal growth rate of net primary government expenditure does not exceed 3.1% in 2019, which corresponds to an annual structural adjustment of 0.65% of GDP.
"Under unchanged policies, there is a risk of a significant deviation from that requirement in 2019 and for 2018 and 2019 taken together," the Commission said.
After it managed to reduce the excess budget deficit in 2016, Slovenia is currently in the preventive phase of the Stability and Growth Pact.
It was also urged to adopt and implement the healthcare and health insurance act and the planned reform of long-term care.
The Commission notes that the government's proposals to reform the healthcare system, whose centrepiece was the draft healthcare and health insurance act, was not adopted before the elections, saying that its prospects for adoption are thus uncertain.
Regarding a draft long-term care act that is currently being drawn up, the Commission says it remains uncertain how Slovenia will increase cost-effectiveness, accessibility and quality of care in the future.
Slovenia should also "ensure the long-term sustainability and adequacy of the pension system, including by increasing the statutory retirement age and by restricting early retirement".
The Commission warns that the country still does not have a concrete plan on how adequate pensions and a sustainable and transparent pension system could be achieved despite an agreement between social partners and the government to adopt the reform by 2020.
According to the Commission, the country should increase the employability of low-skilled and older workers through lifelong learning and activation measures.
"Long-term unemployment remains above pre-crisis levels and still represents almost half of all unemployment. Challenges persist in particular for older workers as their activity and employment rates remain among the lowest in the EU."
Slovenia's society is ageing rapidly, which means the working-age population and labour supply are shrinking. In response to this trend, the government has prepared an active ageing strategy, but concrete action plans are still lacking, the reports says.
As regards the business environment and economy, the Commission believes Slovenia should develop alternative sources of financing for fast-growing companies, and lower the barriers for market entry through the revision of product market regulation and limiting administrative burden.
The Commission believes that reliance on bank credit presents a continued funding challenge, notably for small and medium-sized enterprises, for which access to finance remains a growth barrier.
"Current measures have not yet resulted in improved finance, particularly for innovative firms. There are only a small number of high-growth enterprises in Slovenia and these lack sufficient support to scale up."
Red tape is considered to be one of the most problematic factors in terms of doing business in Slovenia. This mainly relates to uncertainty and complexity of tax procedures, says the Commission.
Slovenia was also urged to enhance competition, professionalisation and independent oversight in public procurement.
"Slovenia struggles with inefficiency and lack of transparency in public procurement. Competition between bidders is comparatively low, as indicated by the low number of bids received per tender and by the high ratio of negotiated procedures without prior call."
The country was also urged to carry out the privatisations "according to the existing plans". The latter comes as no surprise, as the Commission also stressed the importance of privatising Slovenia's biggest bank NLB in its report on the financial and economic situation in March.
"Slovenia still has high state involvement in the economy, notably in the financial sector. The previously published plans for privatisation have been implemented slowly. Proceeding with privatisations would increase the viability of the companies in the long run and would lower the risks for public finances," the Commission said.
The Finance Ministry said in a response that it had expected the recommendations given by the Commission, while welcoming the fact that Slovenia has been recognised for the progress it made in the recent years.
This means that "we are on the right track", the ministry said, adding that structural reforms needed to be continued in order to achieve long-term positive effects.
"We need to be aware that we have not reached a medium-term balance of public finances, nor adequate fiscal room so that the country could effectively tackle the expected negative consequences of the next turn in the economic cycle."
The Ministry of Labour, Family, Social Affairs and Equal Opportunities said it was aware of the challenges in the pension system.
The ministry pointed to the adopted white paper on pensions and a long-lived society strategy, while also noting that social partners had already confirmed the main guidelines for changes of the pension system.