The Organization for Economic Cooperation and Development said in a report the government should also press ahead with pension reform and increase investment in skills and training.

While the budget deficit and public debt have both declined as a share of economic output and are currently on a downward trajectory, age-related spending pressures will continue mounting in the long term without further action, the OECD said.

Slovenia, which narrowly avoided an international bailout for its banks in 2013, introduced a pension reform in that year which will gradually raise the retirement age to 65 by 2020.

But the OECD says the retirement age should be raised to 67 for both men and women, from 63 and 61 respectively, to ease the pressure of an ageing population on the state budget.

"The primary focus of Slovenia's efforts should be on increasing both the statutory as well as the effective pension ages," OECD Secretary-General Angel Gurría told reporters.

The OECD said Slovenia must also improve the management of state-owned enterprises, continue with privatisation and narrow the group of state firms that are considered strategic.

Widespread public ownership, together with strong government involvement in business operations, reduces the scope for business investments and hinders foreign direct investment in the domestic market, the OECD said in its report.

Over the past decades, Slovenia has been reluctant to privatize major companies and banks. The Slovenian government controls about 50 percent of the economy and some 44 percent of the banking sector.