Slovak currency
Slovakia adopted the euro on 1 January 2009 as
the first country in the CEE region and thus became
the 16th member state of the Euro Area. It was thanks
to the sustainable development and good inflation
forecasts. The official exchange rate was 30.1260 SKK/EUR
Slovakia has fully fulfilled all required criteria for adopting
the euro currency, known as Maastricht criteria. Slovak koruna
was under detail scope of the European observers since 28
November 2005. The most observed criteria for the term
of two years were: 1.) Inflation not higher than 1.5 % of the average
of three lowest inflation member states of the EU and also sustainable
low inflation outlook 2.) Government deficit to gross domestic
product (GDP) could not exceed 3% and government debt to GDP could
not exceed 60% at the end of the preceding fiscal year 3.) The nominal
long-term interest rate could not be more than 2 % higher than in the
three lowest inflation member statesMembership in the Euro Area
reduces the currency exchange risks and tightens fiscal discipline of
the adopting countries, which results in more chances for stable economies.
In the long run this will be beneficial for both businesses active in those
countries and Slovakia.
Ratings
Slovakia is generally recognized as an open market economy
whose ability and willingness to pay itsliabilities puts it, according
to prestigious rating agencies, into the 'Investment' level, and this
level isexpected to increase. Based on ratings of Standard and Poor’s,
a credit rating agency, Slovakia has become a leader of the Central
European region.Despite the financial crisis, which caused some countries’
ratings to go down, Slovakia maintains its positive momentum and has
the best ratings among these countries.
Our ratings from Moody’s and Fitchhave been upgraded in July 2008
and Standard and Poor’s last upgrade was in November 2008, well
intothe financial crisis. OECD’s country credit risk ratios were
reviewed in January 2009 – Slovakia was the only country whose
rating improved during this review. The risk was lowered to 0.
During the latest OECD’s country credit risk review in April 2009, Slovakia
maintained its risk to be 0. This is a great advantage for foreign investors, as
it means that Slovakia, Slovak banks and companiesare in a strong financial
position and are able and willing to repay their debts. In spite of the
currentsituation, Slovakia is one of the few countries to maintain a
stable/positive outlook. Our ratings are notexpected to change in the near future.
Inflation
Towards 2002 Slovakia was able to continuously lower
its inflation. One of the reasons was that in the EU pre-accession
period, the development of the inflation in the transition
economies has been the subject of increased attention.
On one hand, there was the goal of bringing the rate
of inflation close to that in the EU (EMU) countries, and
on the other hand there was recognition that the transition
processes and the “catching up” may push inflation up to
higher levels. Slovakia experienced sharp increase
of inflation in 2003. The inflation level of 8.5% represented
theresult of price deregulations (gas, electricity, etc.) and
introduction of flat tax rate of 19% in 2004. Towards 2008,
Slovakia lowered its inflation and was able to keep the
comparable level with the average of Euro Area countries.
The inflation level was also one of the Maastricht criteria,
which Slovakia had to fulfil for its entry to the EuroArea:
the inflation could not be higher than 1.5 % of the average
of three lowest inflation member states of the EU and Slovakia
also had to have sustainable low inflation outlook. Keeping
the inflation low is also one of the important tasks of the Euro Area member states.
Unemployment
The unemployment rate in Slovakia has been 10 percent
or higher since the end of Communist rule. The service
sector, which has developed very quickly since 1989,
employs approximately 62.6 percent of the labour force.
About 33.7 percent works in manufacturing and about 3.7
percent is employed in agriculture. Labour unions are not as
important as they were during the Communist period,
although considerable numbers of workers and employees
continue to belong to unions because of the benefits
they provide. Foreign investors have found that Slovaks
represent a top-quality labour force that is both efficient and
productive. They have had no problem finding skilled engineers
and top managers thanks to an outstanding higher education
system. The standard of education in primary schools is
considered to be the highest in Central Europe. Total
unemployment rate, which is calculated according to
the labour force sample survey carried out by the Statistical Office
of Slovak Republic and the registered rate of unemployment,
which is calculated according to the disposable number of
unemployed people at the Labour Offices have been since 2002
on steady decline. This trend is thanks to the well developing
economy and attractiveness of Slovakia for foreign investors.
The trend of steady decline might be ceased by the global economic
crisis. However, that just means that more of skilled labour force will be to the investor’s disposal.
Employment growth
Foreign investors have found out that Slovaks represent a top-quality
labour force (of more than 2.1 million), efficient and productive.
It is thanks to the Slovaks´ outstanding work attitude and excellent
education system. Foreign companies frequently praise the motivation
and abilities of Slovak workers who also possess good language and
computer skills. Slovakia reaches one of the highest shares of workforce
with the secondary or higher education and one of the highest shares of
the university-educated workforce among all the European countries.
Furthermore, the share of people with a university education is on the rise.
Slovakia is very interesting investment location especially when comparing
average salaries in the CEE Region (or Western Europe) or total labour costs and labour productivity.
Average salaries
Average monthly salary in Slovakia is continuously rising because of high
economic development of Slovakia, rising living standard and high foreign
direct investment volume in Slovakia. In 2008, the average gross salary was
723 EUR per month, excl. obligatory social security contributions.The minimum
monthly salary in 2008 was 240 EUR. The minimum monthly salary has been
raised to295.50 EUR since 1. 1. 2009.
GDP growth at constant prices
After its so-called ‘velvet divorce’ with the Czech Republic in the beginning
of the 1990s, Slovakia was often referred to as a country with little chance for
strong economic development. This was attributed to the fact that during the
existence of Czechoslovakia, a majority of the modern enterprises were located
in the present day Czech Republic. However, the Slovaks have clearly proven
otherwise, sustaining strong economic development. Slovakia’s GDP was
continuously rising and became much higher than the GDP growth in the
EU15. In 2007 Slovakia reached with its GDP growth of 10.4% the highest
GDP growth in the EU27. In 2008 Slovakia for the first time from 1999
experienced decrease of the GDP growth due to the global economic crises.
Despite the decrease, Slovakia had app. 9-times higher GDP growth than
EU15 and the second highest GDP growth in the EU27. The only country
with the higher GDP growth was Romania, which GDP growth was higher
only slightly – by 0.7%. It is important to note that GDP growth in recent
years was substantially affected by strong foreign demand. Currently,
domestic demand and investments also play a significant role. Therefore,
growth in Slovakia can be considered to be sustainable.
