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Economy

Transition to a modern economy

Slovakia has generally fared well during the difficult transition from a centrally planned economy to a modern market economy. The Dzurinda government made excellent progress during 2001 to 2004 in terms of macroeconomic stabilisation, as well as structural reform. Major privatisations are nearly complete (although these privatisations have often been plagued with allegations of corruption) and the banking sector is almost entirely in foreign hands.

Economic reform

Slovakia’s eight years of reform (from 1998 to 2004) under Dzurinda’s government led to many positive changes for the Slovak economy, perhaps the most far-reaching being the ‘flat tax’ of 19% on income, consumption, and corporate profits, operative since 2004. It is currently unclear how many of the reforms will stay in place with Fico’s government, although this flat tax remains unchanged.

Economic growth

Slovakia's economic growth exceeded expectations in 2001 to 2006, despite a general European slowdown. Its GDP real growth rate is 8.3% (2006 estimate); this follows a GDP real growth rate of 5% in 2005, 5.5% for 2004 and 4.4% for 2003. The Slovak Republic is now the fastest growing of the central European economies. It has a GDP purchasing power parity of $99.19 billion (2006 estimate). Unemployment, which was at the high rate of 18% in 2003 to 2004, dropped to 10.2% in 2006. However, unemployment remains a problem in Slovakia.

Foreign direct investment

The Slovakian government has helped facilitate a foreign investment boom with business-friendly policies such as labour market liberalisation and a 19% flat tax. Foreign investment in the automotive sector has been particularly strong. Foreign direct investment (FDI) into Slovakia from 1989 to 2006 cumulatively was $17.3 billion, according to the Organisation for Economic Co-operation and Development (the Slovak Republic joined the OECD in 2000). FDI inflow in 2006 was $4.2 billion, the highest-ever FDI inflow for the country.

Growth industries

Although agriculture remains an important industry for Slovakia, the industries with the best potential of growth are the automotive, electronics, mechanical engineering, chemical engineering and information technology industries. The automotive sector is among the fastest growing sectors in Slovakia due to the recent large investments of Volkswagen (in Bratislava), Peugeot (in Trnava), and Kia Motors (in Zilina). Passenger car production was 295,000 units in 2006, a figure which will double when Kia's factory reaches full capacity. By 2009 Slovakia is predicted to have the highest car production per capita in the world.

Related items

Documents and Reports

	Slovakia property investment report (425Kb)
Documents and Reports

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