Economy of Slovakia

This article deals with the situation and development of the economy of Slovakia in the last 15 years.

• 2.1 Initial phase of transformation
• 2.2 Development since 1993

Current situation

Introduction

The onset of privatization in 1990 the economy was mostly completed by 2006, only some strategic companies are still in state hands (eg railway). The transformation to a market economy can be considered completed 20 years after the fall of socialism. Macroeconomic Stabilitität has long since been achieved, structural reforms are well advanced, the banking sector is almost completely in foreign hands, and foreign investment have ushered in a boom before the crisis erupted. In 2010, the economic growth to be one of the highest in Central Europe again, however, the nominal wage level is still relatively low. The economy is heavily export-oriented.

The latest economic data in Slovakia are:

• Annual economic growth in 2011: 3.3%
• Unemployment in 2011: 13.4 % according to eurostat
• Average wage in 2010: 803 euros
• Annual inflation in 2011: 3.6%
• In comparison with the GDP of the EU average in terms of purchasing power standards Slovakia reached an index of 74.0 (EU -27: 100) (2010).

Tax Reform and Investor

Since 2004 the Slovak tax law applies a so-called flat tax ( flat tax ): It consists in Slovakia, a single tax rate for income tax, corporation tax, VAT and other taxes, namely 19%. Subsequently, a reduced VAT of 10 % for books and medicines has been introduced. Combined with the fact that the Slovak wage level (expressed in EUR, but not on the purchasing power wise) is in Central Europe at a low level, and with the favorable situation of the country and belonging to the euro area, the country has a locational advantage and pulled up to the outbreak of the economic crisis masse foreign direct investment ( Peugeot, Kia, Samsung, Getrag Ford, etc.).

According to a survey, which has carried out the German - Slovak Chamber of Commerce and Industry in March 2010, 92 percent of German entrepreneurs would choose today again locally Slovakia as an investment location. Compared with the Central and Eastern European countries as well as Germany and China, the Slovak Republic, therefore, cuts from the most attractive location. With a score of 2.19 it is clearly ahead of the Czech Republic (2.47 ), Poland (2.67 ), Slovenia ( 2,70 ) and Hungary ( 3.39 ). The IMF and the OECD also declared the end of 2004, Slovakia for the " most reform " of its member countries.

GDP

According to the IMF, the per capita GDP (purchasing power parity) of Slovakia in 2009 was $ 21,245, and thus took the 40th place in the world rankings.

In absolute terms, the gross domestic product ( absolutely without considering the purchasing power is called ) around 63.3 billion euros ( 2009). This results in absolute numbers 11,722 euros per capita GDP.

The GDP of the year 1989, the last year before the beginning of transformation was achieved again in 1997. Slovakia was thus the second country in Eastern Europe after Poland, which reached this imaginary border.

Real GDP growth in 2007 reached 10.6%. In 2008, still could be achieved a growth of 6.2 %. The following year, 2009, the Slovak economy shrank due to the global economic crisis by 4.7 % for 2010, Eurostat expects real growth of 2.7 %

Nominal GDP growth from 2000 to 2009 in SKK, USD and EUR (Source: Statistical Office of the Slovak Republic )

Three sectors

Shares of the three sectors in GDP (2007):

• Agriculture and forestry 4%
• Industry 27%
• Services 69 %

In recent years, a significant increase in the proportion of service was registered.

The workers distributed as follows on these sectors (2002):

• Agriculture 6.2%
• Industry 38.4 %
• Services 55.4 %

Unemployment

Unemployment rose in the wake of the radical reforms of the Dzurinda government of 14.9 % at end- 1998 to 19.2 % at the end of 2001 ( seasonally adjusted harmonized unemployment), but then decreased again to 16.6 % at the end of 2003. 2004 unemployment rose again to 16.9 %.

After Slovakia had joined the EU in 2004 the unemployment rate fell to 9.5% in 2008. Due to the global economic crisis, it rose in 2009 but again to 12.1 % at.

Inflation

After the inflation in 2004 was 7.5% as measured by the Consumer Price Index Europe is still relatively high, they could be reduced in the following years further. So she reached in 2007 only 1.9 %, in the year of introduction of Euro 2009, which was also characterized by the global economic crisis, an extremely low inflation rate of just 0.9 % respectively.

Budget deficit

The budget deficit stands at present ( 2009) due to the global economic crisis at around 6.5% of GDP. The pre-crisis level was around 2 to 3% of GDP, so that the Maastricht criteria were met during the year 2008 and it was possible to adopt the euro, respectively. For the year 2010, the government expects a deficit of around 7% of GDP. Only from 2011 is again expected to decline.

West - East divide

The biggest problem of Slovakia is a huge ( actually been around for well over 200 years existing ) economic disparities between the poor east of the country and the more modern and foreign investment luring west of the country, where even the Bratislava region of approximately 108 % of the average GDP EU is the second richest region of the (former and future) accession countries of Central and Eastern Europe. However, as in the East, the wages are much lower than in the West, foreign investors are recently especially for the East, what should the slope with time soften slightly.

Currency and euro introduction

In Slovakia you pay with the euro, which replaced the Slovak crown at a price of 30.126 SKK / EUR since 1 January 2009.

On 7 May 2008, the European Commission had recommended the introduction of the euro in Slovakia on 1 January 2009 due to the convergence report of the ECB. The country has ( the only one of the 9 countries rated in the Convergence Report ) fulfilled all the Maastricht criteria. On 19th/20th. June agreed at the summit of heads of state and the EU countries of the euro 's introduction, so that the launch could happen as planned.

Foreign Trade

Imports (2008): Electronics 13.8; Motor vehicles and parts 13.1; Fuels, mineral oils 12.6; Machines 9.6; chem. 8.7 products; Electrical 6.1; Iron, steel, 4.8; Foods 4.5; Metal products 4.2; Raw materials 2.9; Other 19.7

Be exported (2008): Car Parts and 21.7; Electronics 17.0; Machines 8.5; Iron and steel 7.7; Electrical 5.8; Fuels, mineral oils 5.1; chemical products 4.8; Metal products 3.7; Foods 3.1; Other 22.6

The main importing countries are (2008): Germany 19.7%, 13.3%, Czech Republic, Russia 10.8%, 5.8% Republic of Korea, 5.7% China, 5.0% in Hungary, 4.0 % France, 3.9 % Polish, 3.7 % Italy,

The main export countries are (2008): Germany 20.2%, 13.0%, the Czech Republic, 6.8% in France, 6.6% Poles, 6.2% Hungarians, 5.9% Italy, 5.7% in Austria, Russia 3.8%

Slovakia is a member of the International Cocoa Organization.

History

Initial phase of transformation

After the fall of communism and the associated central planning ( end of 1989 ) followed - as in all former Eastern Bloc countries - an initial transient phase ( in Slovakia from 1990 to 1993 ), in which GDP has dropped significantly. Until then, foreign trade was restricted to the main part of the countries of the former CMEA. After the markets had collapsed in the east part, it was logical to problems of the markets of the individual Eastern Bloc countries, including Czechoslovakia.

In Slovakia, the general temporary decline in GDP was also encouraged by two factors. First and foremost, the fact that on the territory of Slovakia as part of Czechoslovakia, especially the arms industry and other heavy industry was concentrated (the latter for the CMEA ), which lost its markets by the new conditions in Europe. Secondary also by the fact that Czechoslovakia was dissolved in 1993, which postponed the already noticeable in 1992 -making recovery by one year. However, with the Czech Republic continues to trade was driven, one should not overestimate the direct economic effects of the division.

The economic transformation, ie the transition from a planned economy to a free market economy, also required as part of the liberalization of the economy, a release of the formerly state-regulated prices. In Slovakia, this happened especially from 1 January 1991 and led as expected to a drastically increased inflation of 61.2 % in 1991 (before inflation was almost 0%). For the prices should however be noted that this is in contrast to countries such as Poland, Russia and Hungary never shown inflation in Slovakia, as well as in the Czech Republic, with the exception of this one year, a real problem.

Also, a liberalization of foreign trade was necessary: export and import have been eased considerably, especially by abolishing the former quantity restrictions on the holding of foreign currencies.

A major challenge for the government was also a speedy privatization, under which the parts of restitution, ie a return of goods to old owner, as well as the actual privatization of state enterprises falls. In Czechoslovakia, it was decided in the actual privatization for a coupon privatization by coupon distributions, but below the last Meciar government (1994 - 1998) set in 1995 and was further operated by direct sales. This change is seen more positively in retrospect.

On the labor market, there was the early 1990s, a dramatic increase in the unemployment rate increased from 1.5 % in 1990 to 11.8 % in the following year, as many farms, especially in the defense industry, had to close for the reasons mentioned above. During the phase under Meciar government, the unemployment rate was still slightly lower than at the following Dzurinda government ( see below).

Development since 1993

Since the end of 1994, the 1993/Anfang (now independent ) Slovakia has experienced uninterrupted relatively high economic growth, even ( with the exception of one year ) each year was higher than the economic growth in the Czech Republic. Around 1997-1998, ie towards the end of the term of office of the last government Meciar, economic growth was also boosted by significant public investment in the construction sector. While this increased the country's debt significantly, was the level of indebtedness of the country in 1998 which is still the second lowest in Central and Eastern Europe ( below 60% of GDP).

The Meciar governments always tried (partly due to strategic considerations, partly due to selfish political calculations) ensure that the strategically important major companies in the country remain in the hands of Slovak physical and natural persons.

The end of 1998 the first Dzurinda government came to power, which has as it were, made ​​a 180-degree turn. Sooner or later, all plants were released by foreign firms for privatization, highway construction and other major projects were immediately halted almost completely, and many hitherto rather " vegetating " companies were allowed to go bankrupt. The result was a massive increase in unemployment (about 6 percentage points ) - but now (2004) has something " down " - a temporary significant decline in economic growth, initially, a stagnation of real wages and an increase in the east-west - gradient ( see above ), since it until today practically no highways in the east.

The confidence of foreign investors, however, was restored. In addition, ( as of 2002 ), the first Dzurinda government (1998-2002 ) and the second led by various price deregulation, tax reform and other rapid reforms. In a later phase, new industrial parks were created and promoted worthwhile projects such as the establishment of car manufacturers from state funds. The government subsidies are considered to be partly exaggerated. The most important new developments that significantly improved the country's image in the business community, since January 1, 2004 was the introduction of a so-called flat tax ( see above).