Inflation In the EU pre-accession period, the development
of inflation in transition economies was
the subject of increased attention. On one
hand there was the goal of bringing the rate
of inflation close to that of the EU (EMU)
countries, and on the other hand there was
the recognition that transition processes and
economic "catching up" may push inflation up
to higher levels.
The sharp increase in inflation in
2003 to 8.5% represents the result of price
deregulations (gas, electricity, etc.) and the
introduction of a flat value-added tax of 19% in
2004. The positive development trend for the
future is underlined by core inflation, which
has remained low (average 2.5% for 2007). The
positive prospects were confirmed in the year
2006, when the inflation rate recorded was
4.5%. As Slovakia is going to introduce the EURO
as its official currency in 2009 as the 1stCEE Country,
it adapts its fiscal policy to fulfill the Maastricht criteria. One of these criteria
is inflation and therefore the outlook for its
evolution is stable.
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, athough 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.
The unemployment rate according to a labour
force sample survey carried out by the Statistical
Off ice of Slovak Republic (Statistical) and the
registered unemployment rate according to the
disposable number of unemployed people at
the Labour off ices (Registered) has undergone
a steady decline in recent years. Over the
past few years these diff erent methodologies
- statistical and registered - have resulted in
quite diff erent numbers. However, economic
analysts say that the truth lies closer to the
numbers from the Bureau of Statistics - at
approximately 15 to 16 percent for the year
2005 with a slowly declining trend.
The unemployment rate declined from 19.2%
recorded in 2001 to 13.3% in 2006. This decline
was primarily the result of strong economic
growth.
Employment growth
The positive trend in the unemployment rate
has also been accompanied by an increase in
the employment rate.
Average salaries
Average salaries in the Slovak Republic have
Shown a steady growth. The growth in average
salaries has been significantly affected by
inflation, meaning that average salaries follow
the inflation trend. However, as inflation is expected
to remain stable, the pressure on salary
growth will be significantly reduced.
GDP growth at constant prices
Slovakia's GDP experienced 8.3% growth in
2006, which is especially positive when compared
with the growth recorded in the EU. In 2008, the real
GDP growth is expected to reach 7.6%,
which means slow down from hefty 10.4% seen in 2007.
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.
Exchange rate development
The Slovak Republic has a very open economy,
which has a direct implication for the issue of
exchange rates. In the near future (by 2009) Slovakia
is going to join the monetary union.
To be able to do this, the country had to
meet certain criteria stipulated by the MaastrichtTreaty.
Following the meeting of ECOFIN Ministers held in July 2008,
the exchange rate of the Slovak crown to the Euro was stipulated
to 30.126 SKK/EUR. This exchange rate will come into force
on 1st January 2009, when Slovakia will adopt
the European Single Currency.
Source: SARIO
