SLOVAKIA / THE SLOVAK REPUBLIC
E C O N O M I C R E P O R T
(updated July 2006)
1. ECONOMIC AND POLITICAL ENVIRONMENT
Slovakia is undergoing the difficult transition from a centrally planned economy to a modern market economy. Two governments of the Prime Minister Mikulas Dzurinda (centrist-right-cristian coalition) made progress in 1998-2006 in macroeconomic stabilization and main structural reforms. Major privatizations are nearly complete, the banking sector is almost completely in foreign hands, and foreign investment has picked up. Slovakia's economy exceeded expectations in 2001-2005 during the general European slowdown. Despite the high rates of economic growth, the country has failed to address regional imbalances in wealth and employment. Unemployment is high (12% in 2005) and remains a crucial problem. GDP per capita ranges from 120% of EU average in Bratislava to only 39% in Eastern Slovakia (minimum wage is set EUR 183,-, average salary is almost reaching EUR 500,-).
Slovak economy in 2004 – 2005 was affected by a number of institutional changes:
- Slovak accession to EU on 1 May 2004
- became member of NATO on 29 March 2004
- introduction of tax (19% flax tax rate) and pension reform
- Started reforms of the health care sector, public finances (tax, social services, pensions and education system).
Slovak National Bank approved 2009 as the year to introduce Euro.
The last parliamentary elections were held on 17 June 2006. Robert Fico became Prime Minister, leading a coalition of SMER (Direction, 11 ministers), the Slovak National Party (SNS, 3 ministers), and the Movement for a Democratic Slovakia (HZDS, 2 ministers).
It is expected that also this coalition will pursue a pragmatic economic program.
A second VAT-rate will be introduced for selected goods in 2007 but the flat tax (19%) will be kept for company and individual incomes.
Links:
Slovak Government: http://government.gov.sk/english/
SMER party: http://www.strana-smer.sk/
SNS party: http://www.sns-slota-malikova.sk/
HZDS party: http://www.hzds.sk
EU related news service: www.euractive.com
EU Opinion on the convergence criteria (to introduce EUR)
http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/c_055/c_05520060307en00170020.pdf
Radio Slovak International: http://www.slovakradio.sk/inetportal/rsi/core.php?page=showSprava&id=2763&lang=2
1. 1. Industry
Slovakia was traditionally an agricultural country. In 20th century, Slovakia as a part of the Czechoslovakia became industrialized. The heavy industry was mainly emphasized also politically, including coal mining and the production of machinery and steel. Although heavy industry has declined in importance, manufacturing is still one of the most important sectors of the Slovak economy. 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
· Wood processing, pulp and paper industry
· Tourism
· Services
|
Gross Domestic Products composition by sectors (in %): |
|
services |
66.5 |
slight decline |
|
industry |
24.8 |
slight increase |
|
construction |
05.0 |
increase |
|
agriculture and forestry |
03.7 |
decline tendency |
Slovakia's service sector grew rapidly during last 10 years and now employs about 44% of the labor force and contributes with over 66% to GDP.
Agriculture accounts for less than 4% of GDP and occupies about 6.2% of the labor force.
The automotive sector is one of the fastest growing in Slovakia in recent years. Domestic automotive production significantly increased. There are opportunities for investors and co-operation with car components suppliers. A number of companies are also seeking foreign partners for manufacturing; www.zap.sk (Association of Automotive Industry in SR).
Thanks to the opening to the foreign investments Slovakia has rapidly developed the automotive industry beginning 90ties (Volkswagen, Germany) and this trend continued: PSA Peugeot-Citroen - France, followed by KIA (South Korea) starting production in the second half of 2006. Slovak automotive industry is export-oriented and spins-off many subcontractors in the fields of: machinery, electronics and plastics industry (more details: www.zap.sk), The Automotive Industry Association of Slovak Republic organized a seminar in Israel at Export Institute on 12 September 2005 (contacts: tel: +972-3-5142811 , e-mail: urip@export.gov.il).
Israeli delegation of 9 components producers exhibited at the “AUTOMOTIVE 2006” – 1st International Fair of Plastics, Rubber and composites for Automotives in Slovakia, Bratislava on 16 – 18 May 2006, in Incheba Exhibition Center, http://www.incheba.sk).
Links:
Ministry of Economy - www.economy.gov.sk
Trade and investment Promotion Agency - www.sario.sk
Business Interests Organizations:
Chambers of Commerce - http://www.greenpages.sk/catg_chamb.html
Israeli Chamber of Commerce in Slovakia - http://www.ilcham.sk
Federation of Employers Associations - www.azzz.sk
The Business Alliance of Slovakia / business environment surveys -http://www.alianciapas.sk/pas/english/index.htm
http://en.wikipedia.org/wiki/Economy_of_Slovakia
https://www.cia.gov/cia/publications/factbook/geos/lo.html
1. 2. Agriculture
With respect to the nature of the territory (8 administrative regions) and population density (in average 110 inhabitants per km2), Slovakia is a rural country.
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. There are also vineyards in southwestern Slovakia. The breeding of livestock, including pigs, cattle, sheep and poultry, is also important.
Foreign `natural persons` are not allowed to buy agricultural land in Slovakia 7 years after its accession into EU; but there are no restrictions for `legal entities` / companies.
With EU accession in 2004, Slovakia became a member of the Common Agricultural Policy (CAP). CAP supporting programs in areas of direct payment and support modernisation of agriculture.
|
Direct payments from EU: |
|
year |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
|
in mil. € |
97.70
|
115.4 |
146.6 |
183.2 |
219.7 |
256.2 |
292.8 |
329.3 |
365.9 |
Source: Regulation (EC) No. 1782/2003A: Annex VIIIa of Regulation 1782/2003
Demand for high quality food products is expected to grow as a result of increasing numbers of hypermarkets and food-chain stores. Most high value food products are imported through European intermediaries rather than directly.
In the area of agriculture and biotechnologies would be better prospect co-operation in R&D with assistance of EU funds.
Potential partner for co-operation: Slovak University of Agriculture in Nitra
Office for Science and Research, Marian BRESTIC - Vice-Rector for Science and Research, e-mail: Marian.Brestic@uniag.sk, Tel.: +421-37-65 11 519
Slovakia is considering the possibility of building bio-gas facilities that would use energy crops as a renewable energy source.
Links:
Ministry of Agriculture - www.mpsr.sk
EU funding for agriculture - www.eurozem.sk
Integrated portal - www.agroportal.sk
Slovak University of Agriculture in Nitra - http://www.uniag.sk
Scientific Journal - http://www.fem.uniag.sk/acta/?lng=en
Agrokomplex Exhibition Center, Nitra - http://www.agrokomplex.sk
Prospects for agricultural markets 2001-2008 in CEE - europe.eu.int/comm/agriculture/publi/caprep/prospects2001/ch2.pdf
1. 3. Selected Economic Indicators
|
Year
Indicator |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 (est.) |
|
GDP (in bn. EUR) |
- |
- |
25.1 |
29.3 |
33.1 |
38.1 |
42.5 |
|
GDP per capita (in bn. EUR) |
- |
- |
4,640 |
5,830 |
6,150 |
12,900* |
14,200 |
|
GDP real, growth (in %) ** |
2.0 |
3.8 |
4.6 |
4.5 |
5.5 |
5.1 |
5.5 |
|
Inflation / consumer prices (%) *** |
12.0 |
7.3 |
3.3 |
8.5 |
7.5 |
2.7 |
2.3 |
|
Unemployment (in %) **** |
18.6 |
19.2 |
18.5 |
17.4 |
18.1 |
15.5 |
14.6 |
|
Budget balance (in % of GDP) ***** |
-3.9 |
–4.8 |
–7.8 |
–3.8 |
–3.1 |
-3.0 |
-3.0 |
|
Current account (in % of GDP) |
-3.3 |
–8.6 |
–8.2 |
–0.8 |
–3.5 |
-4.0 |
-3.0 |
|
Gross foreign debt (in % of GDP) |
54.9 |
55.1 |
55.7 |
55.8 |
55.0 |
59.4 |
58.4 |
|
General government deficit (%) |
- |
- |
- |
3.7 |
3.8 |
3.8 |
2.9 |
|
Government debt (% of GDP) |
- |
- |
- |
42.6 |