Slovak economy
Ten years ago, Slovakia embarked on an ambitious plan
of deep structural reforms with a vision to become one
of the best business locations within the European Union (EU).
Today, Slovakia is widely recognised as a success model
for other EU countries for creating an investment and
business-friendly environment.
Slovakia is a valid member of the EU, NATO, OECD, Euro
and the Schengen Area. Slovakia adopted the euro
on 1 January 2009 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. Membership in the euro zone
reduces the currency exchange risks and tightens the fiscal
discipline of the adopting countries, which results in more
opportunity for a stable economy.
In the long run, this will be beneficial for the businesses
active in Slovakia.
Ratings
Slovakia is generally recognised as an open market economy,
which is able and willing to pay its liabilities. Based on
Standard and Poor’s ratings, Slovakia has become the leader
of the Central European region.
The following table shows the various credit ratings for the
countries of the V4. Slovakia as maintained its positive momentum
and has the best ratings in the V4. This is a great advantage
for foreign investors, as it means that Slovakia, Slovak banks
and companies are in a strong financial position and are able,
and willing, to repay their debts.
In spite of the current situation, Slovakia s one of the few countries
to maintain a stable/positive outlook, in which our ratings are not
expected 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
the result 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.
