Economy of Slovakia
| Economy of Slovakia | |
|---|---|
 Headquarters of Slovakia's central bank in Bratislava |
|
| Currency | Euro (EUR) |
| Fiscal year | Calendar year |
| Trade organisations | WTO, EU, OECD, NATO |
| Statistics | |
| GDP | $115.3 billion (2009 est.) |
| GDP growth | -4.9% (2009 est.) |
| GDP per capita | $21,100 (2009 est.) |
| GDP by sector | agriculture: 7.8%; industry: 79.6%; services: 12.6% (2009 est.) |
| Inflation (CPI) | 1.6% (2009 est.) |
| Population below poverty line |
11.6% (2006)[1] |
| Gini index | 26 (2005) |
| Labour force | 2.641 million (2009 est.) |
| Labour force by occupation |
agriculture: 4%; industry: 39%; services: 56.9% (30 September 2008) |
| Unemployment | 14.1% (March 2010)[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 | 42nd[3] |
| External | |
| Exports | $45.05 billion (2009 est.) |
| Export goods | vehicles 25.9%, machinery and electrical equipment 21.3%, base metals 14.6%, chemicals and minerals 10.1%, plastics 5.4% |
| Main export partners | Germany 20%, Czech Republic 13.1%, France 6.7%, Poland 6.6%, Hungary 6.3%, Austria 5.9%, Italy 5.8%, United Kingdom 4.7% (2008) |
| Imports | $46.47 billion (2009 est.) |
| Import goods | machinery and transport equipment 41.1%, intermediate manufactured goods 19.3%, fuels 12.3%, chemicals 9.8%, miscellaneous manufactured goods 10.2% |
| Main import partners | Germany 20%, Czech Republic 17.8%, Russia 10.6%, Hungary 6.9%, South Korea 5.2%, Austria 5%, Poland 4.9%, China 4.2% (2008) |
| FDI stock | $45.75 billion (31 December 2009 est.) |
| Gross external debt | $52.53 billion (31 December 2008) |
| Public finances | |
| Public debt | 34.6% of GDP (2009 est.) |
| Revenues | $28.31 billion |
| Expenses | $32.94 billion (2009 est.) |
| Economic aid | $235 million in available EU structural adjustment and cohesion funds (2004) |
| Foreign reserves | $18.78 billion (31 December 2008 est.) |
| Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars |
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Slovakia's economy increasingly resembles that of a so-called developed country. With the highest sustained GDP growth in the European Union, reporting 10.4% in 2007 and the highest rating from V4 countries[4], the Slovak economy has considered a tiger economy known as the Tatra Tiger. Slovakia has been a 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 stubbornly high. In the long term, improving education outcomes, including by reducing the impact of socioeconomic background on outcomes, will be central to sustaining high economic growth and social cohesion. GDP per capita at purchasing power parity was $22,600 in 2008, which is 70% of the EU average.
Contents |
[edit] 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 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% [1] (Eurostat regional indicators) in 2001 and though it has fallen to (depending on the methodology) 9.8%((cn)) 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.[5] GDP per capita ranges from 175% of EU average in Bratislava to only 50% in Eastern Slovakia (forecast for 2010).
[edit] Economic growth
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.[6]
[edit] Fiscal policy
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.
[edit] Foreign investments
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 year: 756 millions USD,2004 year: 1261 millions USD,2005 year: 1908 millions USD
- outflows-2003 year: 22 millions USD,2004 year: -144 millions USD,2005 year: 146 millions USD
[edit] Services
Slovak service sector grew rapidly during the last 10 years and now employs about 44% of the population and contributes with over 66% 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.
[edit] 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 2005, industry (including construction) accounted for 28.7% 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 295,000 units in 2006, a figure which will double when Kia's factory reaches full capacity. By 2009 therefore Slovakia will have the highest per capita car production 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. In 2006, machinery accounted for more than a half of Slovakia's export.
[edit] Agriculture
In 2005, agriculture accounted for 3.4% of GDP (compared to 6.9% in 1993) and occupied about 4.7% 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.
[edit] R&D
According to a recent report by the European Commission, Slovakia (along with some other Central and Eastern European economies) is low down on the list of EU states in the area 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. World Bank urges Slovakia to upgrade information infrastructure and reform education system, 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 budgets for the program will be set by the RDA. The overall amount available for the program depends on the 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.
[edit] Labour
The authorities are now preparing the economy for conditions of the Eurozone. Some policy makers see it a short-term a priority of heading off a potential post-entry boom. They also see a longer-term priority of maintaining flexible labour and product markets so as to facilitate adjustment to idiosyncratic shocks. These policies, however, face opposition among sectors of the population that favor a strengthening labor standards and a stabilization of consumption. Measured in monetary terms, Slovakia's living standard has risen significantly in recent years. It remains below average in the EU15 countries,[7] and while economic changes have also brought new problems, for example weakening public access to social welfare, education, and public transportation.
The minimum wage in Slovakia is set at 295,4 € per month[8], the average salary for year 2008 is 21 226 SKK = 704,6 € per month[9].
[edit] References
- ^ http://www.employment.gov.sk/dokumenty/AnalysesAndStatistics/SocialReport2006.pdf
- ^ Euro area unemployment rate at 10.0% - Eurostat. 30. April 2010
- ^ "Doing Business in Slovak Republic 2010". World Bank. http://www.doingbusiness.org/ExploreEconomies/?economyid=168. Retrieved 2010-08-20.
- ^ Slovensko má najvyšší rating z krajín V4 (in Slovak)
- ^ Votruba, Martin. "Regional Wealth". Slovak Studies Program. University of Pittsburgh. http://www.pitt.edu/~votruba/qsonhist/regionalwealthslovakia.html#skpppmap. Retrieved 2010-04-10.
- ^ "Gross domestic product in the 4th quarter of 2007". Statistical Office of the Slovak Republic. 2008-03-04. http://portal.statistics.sk/showdoc.do?docid=11460. Retrieved 2008-02-14.
- ^ Votruba, Martin. "Relative Wealth". Slovak Studies Program. University of Pittsburgh. http://www.pitt.edu/~votruba/qsonhist/regionalwealthcentraleurope.html. Retrieved 2010-04-10.
- ^ Zvýšenie minimálnej mzdy podľa priemyselníkov ohrozí zamestnanosť (in Slovak)
- ^ Priemerná mzda stúpla na 21-tisíc korún (in Slovak)
[edit] See also
[edit] 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)
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