Economy of Slovakia

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Economy of Slovakia
Nbs.jpg
Rank 64th (PPP, 2012 est.)
Currency Euro (EUR)
Fiscal year Calendar year
Trade organisations WTO, EU, OECD, NATO
Statistics
GDP Increase$132.4 billion (PPP,2012 est.)
GDP growth Decrease2.6% (Real, 2012 est.)
GDP per capita Increase$24,300 (PPP, 2012 est.)
GDP by sector agriculture: 3.8%; industry: 36.4%; services: 59.8% (2012 est.)
Inflation (CPI) Decrease3.6% (CPI, 2012 est.)
Population
below poverty line
1.9% (2009)[1]
Gini coefficient 26 (2005)
Labour force Increase2.724 million (2012 est.)
Labour force
by occupation
agriculture: 3.5%; industry: 27.0%; services: 69.4% (December 2009)
Unemployment Decrease12.8% (2012 est.)
Average gross salary 888 € / 1,220 $, monthly (2012)[2]
Average net salary 789 € / 1023 $, monthly (2013 Q1)[2]
Main industries metal and metal products; food and beverages; electricity, gas, coke, oil, nuclear fuel; chemicals and manmade fibers; machinery; paper and printing; earthenware and ceramics; transport vehicles; textiles; electrical and optical apparatus; rubber products
Ease of doing business rank 46th[3]
External
Exports Decrease$77.82 billion (2012)
Export goods machinery and electrical equipment 35.9%, vehicles 21.0%, base metals 11.3%, chemicals and minerals 8.1%, plastics 4.9% (2009)
Main export partners  Germany 22.4%
 Czech Republic 14.6%
 Poland 8.6%
 Hungary 7.8%
 Austria 7.1%
 France 5.6%
 Italy 4.9%
 United Kingdom 4.1% (2012 est.)[4]
Imports Decrease$74.29 billion (2012 est.)
Import goods machinery and transport equipment 31%, mineral products 13%, vehicles 12%, base metals 9%, chemicals 8%, plastics 6% (2009 est.)
Main import partners  Germany 18.5%
 Czech Republic 17.9%
 Russia 9.9%
 Austria 7.7%
 Hungary 7.2%
 Poland 6.0%
 South Korea 4.3% (2012 est.)[5]
FDI stock Increase$53.09 billion (31 December 2012 est.)
Gross external debt Increase$72.94 billion (30 November 2011 est.)
Public finances
Public debt Increase48.6% of GDP (2012 est.)
Revenues Decrease$31.39 billion (2012 est.)
Expenses Decrease$35.85 billion (2012 est.)
Economic aid $235 million in available EU structural adjustment and cohesion funds (2004)
Credit rating
Foreign reserves IncreaseUS$2.676 billion (31 December 2012)

Main data source: CIA World Fact Book

All values, unless otherwise stated, are in US dollars
Central business district in Bratislava, Mlynské Nivy

The economy of Slovakia is a high income economy.[8] With the highest sustained GDP growth in the European Union, reporting 10.4% in 2007 and the highest rating from V4 countries,[9] the Slovak economy has been considered a tiger economy known as the Tatra Tiger. Slovakia has been an EU member state since 2004 and adopted the euro currency at the beginning of 2009. Its capital, Bratislava, is the largest financial centre in Slovakia. Unemployment has fallen considerably, although long-term unemployment remains high. GDP per capita at purchasing power parity was €18,100 in 2010, which was 74% of the EU average [1].

History[edit]

Since the establishment of the Slovak Republic in January 1993, Slovakia has undergone a transition from a centrally planned economy to a free market economy, a process which some observers were to believe was slowed in the 1994–98 period due to the crony capitalism and other fiscal policies of Prime Minister Vladimír Mečiar's government. While economic growth and other fundamentals improved steadily during Mečiar's term, public and private debt and trade deficits also rose, and privatization was uneven. Real annual GDP growth peaked at 6.5% in 1995 but declined to 1.3% in 1999.

Two governments of the "liberal-conservative" Prime Minister Mikuláš Dzurinda (1998–2006) pursued policies of macroeconomic stabilization and market-oriented structural reforms. Nearly the entire economy has now been privatizatized, and foreign investment has picked up. Economic growth exceeded expectations in the early 2000s, despite recession in key export markets. In 2001 policies of macroeconomic stabilization and structural reform led to spiraling unemployment. Unemployment peaked at 19.2% [2] (Eurostat regional indicators) in 2001 and though it has fallen to (depending on the methodology) 9.8%([citation needed] or 13.5%[citation needed] as of September 2006, it remains a problem. Solid domestic demand boosted economic growth to 4.1% in 2002. Strong export growth, in turn, pushed economic growth to a still-strong 4.2% in 2003 and 5.4% in 2004, despite a downturn in household consumption. Multiple reasons entailed a GDP growth of 6% in 2005. Headline consumer price inflation dropped from 26% in 1993 to an average rate of 7.5% in 2004, though this was boosted by hikes in subsidized utilities prices ahead of Slovakia's accession to the European Union. In July 2005, the inflation rate dropped to 2.0% and is projected at less than 3% in 2005 and 2.5% in 2006. In 2006, Slovakia reached the highest economic growth (8.9%) among the members of OECD and the third highest in the EU (just behind Estonia and Latvia). The country has had difficulties addressing regional imbalances in wealth and employment.[10] GDP per capita ranges from 178% of EU average in Bratislava to only 49% in Eastern Slovakia.

Economic growth[edit]

In 2007, Slovakia reached the highest economic growth among the members of OECD and the EU. The annual GDP growth was 10.4% at constant prices, with the record level of 14.3% reached in the fourth quarter.[11] In 2010, Slovakia grew by 4.0% which was the highest growth among new EU member states.

Fiscal policy[edit]

The current account deficit from its recent peak at $1.9 billion (8.8%) of GDP in 2001 shrank to $1.4 billion (3.4%) of GDP in 2004. A drop in the trade deficit accounted for most of the improvement. The foreign trade balance is now largely influenced by strong growth in capital good imports related to foreign investments in the country. Slovakia's total foreign debt was $23.7 billion at the end of 2004, up $5.4 billion from the 2003. The increase in the level of debt was caused largely by exchange rate losses of the dollar. Budget performance in 2005 was strong, as the government aimed to implement fiscally responsible policies to drive the budget deficit below the Maastricht-defined ceiling of 3% of GDP by 2007 in order to qualify for euro adoption. The government's budget for 2006 targets a general government deficit of 2.9% of GDP.

Foreign investments[edit]

Foreign direct investment (FDI) in Slovakia has increased dramatically. Cheap and skilled labor, a 19% flat tax rate for both businesses and individuals, no dividend taxes, a weak labor code, and a favorable geographical location are Slovakia's main advantages for foreign investors. FDI inflow grew more than 600% from 2000 and cumulatively reached an all-time high of, $17.3 billion USD in 2006, or around $18,000 per capita by the end of 2006. The total inflow of FDI in 2006 was $2.54 billion. In October 2005 new investment stimuli introduced – more favorable conditions to IT and research centers, especially to be located in the east part of the country (where is more unemployment), to bring more added value and not to be logistically demanding.

Origin of foreign investment 1996–2005 – the Netherlands 24.3%; Germany 19.4%, Austria 14.1%; Italy 7.5%, United States (8th largest investor) 4.0%. Top investors by companies: Deutsche Telekom (Germany), Neusiedler (Austria), Gaz de France (France), Gazprom (Russia), U.S.Steel (U.S.), MOL (Hungary), ENEL (Italy), E.ON (Germany)...

Foreign investment sectors – industry 38.4%; banking and insurance 22.2%; wholesale and retail trade 13.1%; production of electricity, gas and water 10.5%; transport and telecommunications 9.2%.

Foreign direct investment " on green field"

  • inflows -2003: 756 million USD,2004: 1261 million USD,2005: 1908 million USD
  • outflows-2003: 22 million USD,2004: -144 million USD,2005: 146 million USD

Services[edit]

Slovak service sector grew rapidly during the last 10 years and now employs about 69% of the population and contributes with over 61% to GDP. Slovakia's tourism has been rising in recent years, income has doubled from 640 million USD in 2001 to 1.2 billion USD in 2005. However, this sector still remains underdeveloped in comparison with neighbouring countries.

Industry[edit]

Slovakia became industrialized mostly in the second half of the 20th century. Heavy industry (including coal mining and the production of machinery and steel) was built for strategic reasons because Slovakia was less exposed to the military threat than the western parts of Czechoslovakia. After the end of the Cold War, the importance of industry, and especially of heavy industry, declined. In 2010, industry (including construction) accounted for 35.6% of GDP, compared with 49% in 1990. Nowadays, building on a long-standing tradition and a highly skilled labor force, main industries with potential of growth are following sectors: Automotive, Electronics, Mechanical engineering, Chemical engineering, Information technology. The automotive sector is among the fastest growing sectors in Slovakia due to the recent large investments of Volkswagen (Bratislava), Peugeot (Trnava), and Kia Motors (Žilina Plant, Žilina). Passenger car production was slightly more than 400,000 units in 2009,[12] a figure which has almost doubled after Kia's factory opening. By 2010 therefore Slovakia will be among the highest per capita car producers in the world. A global downturn in automobile sales, however, may limit future growth of this industry. Other big industrial companies include US Steel (metallurgy), Slovnaft (oil industry), Samsung Electronics (electronics), Sony (electronics), Mondi Business Paper (paper), Hydro Aluminium (aluminum production), and Whirlpool Corporation. In 2006, machinery accounted for more than a half of Slovakia's export.

Agriculture[edit]

In 2010, agriculture accounted for 2.7% of GDP (compared to 6.9% in 1993) and occupied about 3.5% of the labor force (down from 10.2% in 1994). Over 40% of the land in Slovakia is cultivated. The southern part of Slovakia (bordering with Hungary) is known for its rich farmland. Growing wheat, rye, corn, potatoes, sugar beets, grains, fruits and sunflowers. Vineyards are concentrated in Little Carpathians, Tokaj, and other southern regions. The breeding of livestock, including pigs, cattle, sheep, and poultry is also important.

R&D[edit]

According to a recent report by the European Commission, Slovakia (along with some other Central and Eastern European economies) is low on the list of EU states in terms of innovation (Slovakia ranks 22nd). Within the EU, it ranks next to last on knowledge creation and last for innovation and entrepreneurship. In the process of transition to a knowledge economy, it particularly lacks investment into education and a broader application of IT. The World Bank urges Slovakia to upgrade information infrastructure and reform the education system. The OECD states that a stronger product market competition would help.

In March 2006, the Slovak government introduced new measures to implement the Action Plan for R&D and Innovation. The program covers the period from 2006 to 2010. The RDA is expected to launch at least one call for the expression of interests related to this program each year. The annual budget for the program will be set by the RDA. The overall amount available for the program depends on annual national budget resources and is likely to vary from year to year. Following an increase of around 50% in budget resources, the RDA disposes of a total budget of €19.31 million in 2006.

Labour[edit]

The minimum wage in Slovakia is set at 337,- € per month,[13] the average salary for 2012 is 805 € per month.[14] The level of unemployment in 2009 rose to 12.1% after a period of decreasing unemployment.[15]

Statistics[edit]

Graphical depiction of Slovakia's product exports in 28 color-coded categories.

Exchange rates[16]

Year 2008 2009
EUR/SKK 30.13
USD/SKK 21.39

Foreign trade[16]

Year 2008 2009 2010
Exports € bn 49.5 39.7 35.0
Imports € bn 50.3 38.8 34.6

See also[edit]

References[edit]

External links[edit]