Economy of Slovakia

The economy of Slovakia is based upon Slovakia becoming an EU member state in 2004, and adopting the euro at the beginning of 2009. Its capital, Bratislava, is the largest financial centre in Slovakia. As of 2018 (1.Q.), the unemployment rate was 5.72%.[21]

Economy of Slovakia

Headquarters of Slovakia's central bank in Bratislava
Currency	Euro (EUR, €)
Fiscal year	Calendar year
Trade organisations	EU, WTO, OECD
Country group	Developed/Advanced[1] High-income economy[2]
Statistics
Population	5,457,873 (1 January 2020)[3]
GDP	$106.552 (nominal, 2019 est.)[4] $187.264 billion (PPP, 2020 est.)[5]
GDP rank	60th (nominal, 2019) 68th (PPP, 2019)
GDP growth	4.0% (2018) 2.3% (2019) −6.2% (2020e) 5.0% (2021e)[5]
GDP per capita	$19,548 (nominal, 2019 est.)[4] $36,640 (PPP, 2019 est.)[4]
GDP per capita rank	40th (nominal, 2019) 38th (PPP, 2019)
GDP by sector	agriculture: 3.8% industry: 35% services: 61.2% (2017 est.)[6]
Inflation (CPI)	1.1% (2020 est.)[5] 2.8% (2019)[5] 2.5% (2018)[5]
Population below poverty line	12.6% (2013)[7] 16.3% at risk of poverty or social exclusion (2018)[8]
Gini coefficient	20.9 low (2018, Eurostat)[9]
Human Development Index	0.857 very high (2018)[10] (36th) 0.804 very high IHDI (2018)[11]
Labour force	2,736,717 (2019)[12] 72.4% employment rate (Target: 72%; 2018)[13]
Labour force by occupation	agriculture: 3.9% industry: 22.7% services: 73.4% (2015)[6]
Unemployment	6.5% (May 2020)[14] 16.2% youth unemployment (Q4-2019)[15]
Average gross salary	€1,219 / $1,357 monthly (December, 2019)
Average net salary	€894 / $1,004 monthly (April, 2019)
Main industries	automobiles; metal and metal products; electricity, gas, coke, oil, nuclear fuel; chemicals, synthetic fibers, wood and paper products; machinery; earthenware and ceramics; textiles; electrical and optical apparatus; rubber products; food and beverages; pharmaceutical
Ease-of-doing-business rank	45th (very easy, 2020)[16]
External
Exports	$80.8 billion (2017 est.)[6]
Export goods	vehicles and related parts 27%, machinery and electrical equipment 20%, nuclear reactors and furnaces 12%, iron and steel 4%, mineral oils and fuels 5% (2015 est.)
Main export partners	Germany 20.7%  Czech Republic 11.6%  Poland 7.7%  France 6.3%  Italy 6.1%  United Kingdom 6.0%  Hungary 6.0%  Austria 6.0% (2017)[6]
Imports	$80.07 billion (2017 est.)[6]
Import goods	machinery and electrical equipment 20%, vehicles and related parts 14%, nuclear reactors and furnaces 12%, fuel and mineral oils 9% (2015 est.)
Main import partners	Germany 19.1%  Czech Republic 16.3%  Austria 10.3%  Poland 6.5%  Hungary 6.4%  South Korea 4.5%  Russia 4.5%  France 4.3%  China 4.2% (2017)[6]
FDI stock	$69.92 billion (31 December 2017 est.)[6] Abroad: $21.29 billion (31 December 2017 est.)[6]
Current account	−$2.005 billion (2017 est.)[6]
Gross external debt	$75.04 billion (31 March 2016 est.)[6]
Public finances
Public debt	48.0% of GDP (2019)[17] €45.202 billion (2019)[17]
Budget balance	€1.2 billion deficit (2019)[17] −1.3% of GDP (2019)[17]
Revenues	41.5% of GDP (2019)[17]
Expenses	42.8% of GDP (2019)[17]
Economic aid	$235 million in available EU structural adjustment and cohesion funds (2004)
Credit rating	Standard & Poor's:[18] A+ (Domestic) A+ (Foreign) AAA (T&C Assessment) Outlook: Stable[19] Moody's:[19] A1 Outlook: Stable Fitch:[19] A+ Outlook: Stable Scope:[20] A+ Outlook: Negative
Foreign reserves	$3.622 billion (31 December 2017 est.)[6]
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars.

Due to the Slovak GDP growing very strongly from 2000 until 2008 – e.g. 10.4% GDP growth in 2007 – the Slovak economy was referred to as the Tatra Tiger.

History

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 privatized, 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% (Eurostat regional indicators) in 2001,[22] and though it has fallen to (depending on the methodology) 9.8%( or 13.5% 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.[23] GDP per capita ranges from 188% of EU average in Bratislava to only 54% in Eastern Slovakia.

GDP growth

The development of Slovakia's GDP according to the World Bank:[24]

Year	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018
% GDP	3.3	4.5	5.4	5.2	6.7	8.4	10.8	5.6	−5.4	5.0	2.8	1.6	1.5	2.7	4.2	3.1	3.2	4.1

In 2007, Slovakia obtained the highest GDP growth among the members of OECD and the EU, with the record level of 14.3% in the fourth quarter.[25] In 2014, GDP growth was 2.4% and in 2015 and 2016 Slovakia's economy grew 3.6% and 3.3% respectively. For year 2018, National Bank of Slovakia predicts raise of GDP by 4%.

Foreign investments

Central business district in Bratislava, Mlynské Nivy

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, US$17.3 billion 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 there 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: US$756 million,2004: US$1261 million,2005: US$1908 million
• outflows-2003: US$22 million,2004: -144 million USD,2005: US$146 million

Services

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 US$640 million in 2001 to US$1.2 billion in 2005.

Industry

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), Kia Motors (Žilina) and since 2018 also Jaguar Land Rover in Nitra. Passenger car production was 1,040,000 units in 2016, what makes Slovakia the largest automobile producer in produced cars per capita.[26] Other big industrial companies include U.S. Steel (metallurgy), Slovnaft (oil industry), Samsung Electronics (electronics), Foxconn (electronics), Mondi SCP (paper), Slovalco (aluminum production), Hyundai Mobis (automotive), Continental Matador (automotive) and Whirlpool Corporation. In 2006, machinery accounted for more than a half of Slovakia's export.

Largest companies by revenue

Company	Revenue (EUR millions)[27]
Volkswagen Slovakia	7,549
Kia Motors Slovakia	5,184
Slovnaft	3,421
Všeobecná zdravotná poisťovňa	2,981
PCA Slovakia	2,694
U. S. Steel Košice	2,619
Samsung Slovakia	2,377
Slovenské elektrárne	2,183
Slovenský plynárenský priemysel	1,493
Tesco stores	1,451

Largest companies by profit

Company	Profit (EUR millions)[28]
SPP Infrastructure	645
U. S. Steel Košice	499
Slovnaft Eustream	352
Slovenský plynárenský priemysel	318
Kia Motors Slovakia	209
Continental Matador	175
Volkswagen Slovakia	173
Slovenská sporiteľňa	162
Všeobecná úverová banka	160
SPP distribúcia	153

Agriculture

In 2016, agriculture accounted for 3.6% of GDP (compared to 6.9% in 1993) and occupied about 3.9% 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.

IT

In recent years, service and high-tech-oriented businesses have prospered in Slovakia. Many global companies, including IBM, Dell, Lenovo, AT&T, SAP, Amazon, Johnson Controls, Swiss Re and Accenture, have built outsourcing and service centres in Bratislava [29] and Košice (T-Systems, Cisco Systems, Ness, Deloitte [30]). Slovak IT companies included ESET, Sygic and Pixel Federation have headquarters in Bratislava.

R&D

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

The minimum wage in Slovakia is set at 520 € per month,[31] the average salary for 2017 was 1052 € per month,[32] in the Bratislava region in 2017 the average salary was €1527 per month.[33] As of February 2018 the unemployment rate stood at 5.88%.[34]

Statistics

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

Currency switch to the euro

Slovakia switched its currency from the Slovak crown (SK-slovenská koruna) to the Euro on 1 January 2009, at a rate of 30.1260 korunas to the euro.

Foreign trade[35]

Year	2008	2009	2010	2011	2012	2013	2014	2015	2016
Exports € bn	49.5	39.7	35.0	56.8	62.8	64.4	64.8	73.12	74.35
Imports € bn	50.3	38.8	34.6	55.8	59.2	60.1	60.2	71.09	71.47

See also

• Tatra Tiger
• List of Slovak regions by GDP
• List of Slovak companies
• Economy of Europe

References

1. "World Economic Outlook Database, April 2019". IMF.org. International Monetary Fund. Retrieved 29 September 2019.
2. "World Bank Country and Lending Groups". datahelpdesk.worldbank.org. World Bank. Retrieved 29 September 2019.
3. "Population on 1 January". ec.europa.eu/eurostat. Eurostat. Retrieved 13 July 2020.
4. "World Economic Outlook Database, October 2019". IMF.org. International Monetary Fund. Retrieved 16 October 2019.
5. "World Economic Outlook Database, April 2020". IMF.org. International Monetary Fund. Retrieved 17 April 2020.
6. "CIA World Factbook". CIA.gov. Central Intelligence Agency. Retrieved 7 January 2019.
7. "Poverty headcount ratio at national poverty lines (% of population) - Slovak Republic". data.worldbank.org. World Bank. Retrieved 19 October 2019.
8. "People at risk of poverty or social exclusion". ec.europa.eu. Eurostat. Retrieved 13 January 2020.
9. "Gini coefficient of equivalised disposable income - EU-SILC survey". ec.europa.eu. Eurostat. Retrieved 20 December 2019.
10. "Human Development Index (HDI)". hdr.undp.org. HDRO (Human Development Report Office) United Nations Development Programme. Retrieved 11 December 2019.
11. "Inequality-adjusted HDI (IHDI)". hdr.undp.org. UNDP. Retrieved 22 May 2020.
12. "Labor force, total - Slovak Republic". data.worldbank.org. World Bank. Retrieved 1 November 2019.
13. "Employment rate by sex, age group 20-64". ec.europa.eu/eurostat. Eurostat. Retrieved 30 May 2019.
14. "Unemployment by sex and age - monthly average". appsso.eurostat.ec.europa.eu. Eurostat. Retrieved 2 July 2020.
15. "Youth unemployment rate". data.oecd.org. OECD. Retrieved 3 April 2020.
16. "Ease of Doing Business in Slovak Republic". Doingbusiness.org. Retrieved 21 November 2017.
17. "Euro area and EU27 government deficit both at 0.6% of GDP" (PDF). ec.europa.eu/eurostat. Eurostat. Retrieved 28 April 2020.
18. "Sovereigns rating list". Standard & Poor's. Retrieved 26 May 2011.
19. Rogers, Simon; Sedghi, Ami (15 April 2011). "How Fitch, Moody's and S&P rate each country's credit rating". The Guardian. Retrieved 28 May 2011.
20. "Scope affirms Slovakia's rating at A+ and revises the Outlook to Negative". Scope Ratings. Retrieved 2 May 2020.
21. "Statistical Office of the Slovak Republic". Archived from the original on 24 September 2018. Retrieved 12 March 2018.
22. "Wayback Machine" (PDF). 4 July 2007. Archived from the original (PDF) on 4 July 2007.
23. Votruba, Martin. "Regional Wealth". Slovak Studies Program. University of Pittsburgh. Retrieved 10 April 2010.
24. "GDP growth (annual %)". data.worldbank.org. World Bank. Retrieved 8 April 2019.
25. "Gross domestic product in the 4th quarter of 2007". Statistical Office of the Slovak Republic. 4 March 2008. Retrieved 14 February 2008.
26. "Slovensko kraľuje výrobe áut vo svete, dosiahli sme nový rekord" (in Slovak). HNonline. 17 January 2017. Retrieved 25 June 2017.
27. "Najväčšie firmy na Slovensku: zoradené podľa tržieb". finstat.sk.
28. "Firmy na Slovensku zoradené podľa zisku". finstat.sk.
29. "Lenovo invests in Slovakia with new jobs". Slovak Investment and Trade Development Agency. 20 April 2006. Retrieved 25 April 2007.
30. "Členovia – Košice IT Valley". www.kosiceitvalley.sk.
31. "Minimálna mzda 2018". Minimalnamzda.sk. Retrieved 1 March 2018.
32. "Priemerná mzda". www.minimalnamzda.sk. Retrieved 1 March 2018.
33. "Rozloženie platov v Bratislavskom kraji – Platy.sk". platy.sk.
34. "Nezamestnanosť ďalej klesá, bez práce je 5,88 percenta ľudí". ekonomika.sme.sk. Retrieved 1 March 2018.
35. "CEE Basic Data - Key economic indicators and forecasts". Ceemarket.com. Retrieved 3 March 2015.

External links

• OECD's Slovakia country Web site and OECD Economic Survey of Slovakia
• Economy of Slovakia from The World Factbook
• Slovakia report (monitor 2005)
• Slovakia report (Index of Economic Freedom)
• Slovakia in selected macro-economic numbers
• Background note Slovakia (incl. economy)