Economic and Political Overview

flag Slovakia Slovakia: Economic and Political Overview

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response

 

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Slovakia has experienced sustained and steady GDP growth since its integration into the European Union in 2004, except for the financial crisis of 2008-2009 and the Eurozone crisis of 2011-2012. In recent years, the Slovak economy had returned to growth, fuelled by the return of internal and European demand. Nevertheless, the outbreak of the COVID-19 pandemic and the global crisis it caused pushed the country into a heavy recession in 2020, with GDP estimated to have dropped by 4.8% due to a sharp contraction in investments, low foreign demand and a sharp drop in private consumption. In 2021, Slovakia met a growth of 4.4%, hindered by supply shortages that affected the automotive sector (which accounts for almost 14% of GDP alone). For 2022 the IMF forecasts a stronger growth of 5.2% followed by 4.3% in 2023, with domestic demand as the main growth driver.

The government deficit has increased to -3.4% in 2021 (from -2.1% one year earlier) because of the government measures implemented to contain the effects of the COVID-19 crisis and due to weak tax revenues and social contributions. Despite lower expenditure, the deficit should decrease only marginally over the forecast horizon. The debt-to-GDP ratio reached 61.4% in 2021 and is expected to increase slightly this year (62%) before decreasing to 60.1% in 2023 (IMF). Inflationary pressures have intensified last year ending at 2.4%, driven by adverse supply-side developments and labour shortages, and also by fast-rising commodity and input prices. Inflation is expected to further increase at the beginning of 2022, with average annual inflation of 3%. Overall, Slovakia remains a small economy, but has a strong financial system and offers a production platform for the European automotive and electronic industries. Structural problems that Slovakia faces are regional disparities, poor infrastructure, and an ageing population.
 
The unemployment rate picked up to 6.8% in 2021 (compared to 5.8% before the pandemic) despite the measures taken to mitigate the impact of the crisis. It should gradually decrease to 6.1% and 5.8% in 2022 and 2023, respectively. However, the expiry of the protective measures implemented on the labour market (such as the short-time work scheme) is likely to keep unemployment at higher levels than before the pandemic, while wage growth is likely to be weaker and regional disparity strong (West of Slovakia enjoys a strong concentration of foreign and domestic companies that curbs unemployment). Around 13.8% of the population is at risk of poverty (especially in the eastern part of the country), below the EU average of 21.9% (Eurostat, latest data available).

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 105.13e104.49116.75127.50137.63
GDP (Constant Prices, Annual % Change) 2.5-4.84.45.24.3
GDP per Capita (USD) 19,28919,14521,38323,32325,146
General Government Balance (in % of GDP) -1.8-2.1-3.4-3.5-3.2
General Government Gross Debt (in % of GDP) 48.260.361.462.060.1
Inflation Rate (%) 2.82.02.43.02.1
Unemployment Rate (% of the Labour Force) 5.86.76.86.15.8
Current Account (billions USD) -2.85-0.37-1.08-1.72-2.45
Current Account (in % of GDP) -2.7-0.4-0.9-1.3-1.8

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Main Sectors of Industry

The Slovak Republic has a highly qualified labour force of 2.7 million out of its 5.4 million population. The agriculture sector is little developed and represented only 2.2% of the GDP and 2.8% of employment in 2021 (World Bank), although almost two-fifths of the land is arable. The main agricultural products in the country are cereals, potatoes, sugar beets, and grapes. The mountainous area of Slovakia has vast forests and pastures, which are used for intensive sheep grazing, and it is rich in mineral resources including iron, copper, lead, and zinc. In 2021 the country’s agricultural sector recorded a decrease of -14.3%, according to preliminary data from Eurostat, which can be explained by the ongoing COVID-19 pandemic.

The secondary sector represents 26.4% of the GDP and employs 36.1% of the workforce. Heavy industry sectors - such as metal and steel - are still in a restructuring phase. High value-added industries, like electronics, engineering, and petrochemicals, are installed in the western part of the country. Sectors like automobile and consumer goods experienced a sizeable contraction during the pandemic, but have started to recover relatively fast and are offering attractive opportunities to foreign investors. Although Slovakia’s competitiveness supports the recovery of the sector, global automotive demand remains sluggish. The World Bank estimates that the manufacturing sector alone accounts for more than one-fifth of Slovakia’s GDP (26.4%). Figures from the national statistical office show that in the first eleven months of 2021 industrial production decreased by 8.9% year-on-year. Such contraction can be explained among other factors by the fact that automotive production, which is a crucial sector of the Slovak economy, had its main production plants closed for the majority of the first half of 2021.

The services sector contributes 61.0% of the GDP and employs around 61.1% of the active population. It is dominated by trade and real estate. The development of tourism may also become important for the Slovak economy in the coming years, as it has been one of the country's most dynamic sectors before the outbreak of the COVID-19 crisis (6.2 million tourists before the pandemic). The country’s banking sector consists of 27 financial institutions, it is strong and largely owned by foreign groups (mostly from Austria, Italy, and Belgium; whereas only four are owned by Slovakians).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.8 36.1 61.1
Value Added (in % of GDP) 2.2 26.4 61.0
Value Added (Annual % Change) -14.3 -12.7 -0.2

Source: World Bank - Latest available data.

 

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Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 MUR 0.030.030.020.030.02

Source: World Bank - Latest available data.

 
 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
66,3/100
World Rank:
61
Regional Rank:
33

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
6.88/10
World Rank:
37/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

Slovakia remains strongly dependent on external markets, with foreign trade reaching 170.6% of its GDP in 2020 (World Bank, latest data available). Slovakia's strong industrial tradition, tax incentives, inexpensive and skilled workforce, rapidly developing infrastructure (boosted by an influx of EU funds) and fragile but real growth, make the country a preferred base for trade. The country also benefits from an advantageous geographical location at the crossroads of Central Europe. Since 2009, the economic growth of Slovakia has been driven by its exports. The country represents a platform of re-exportation for the European automotive industry (28% of the country’s total exports in 2020). Other goods exported include motor vehicles parts (5.7%), television receivers (5.0%) and line telephony (4.9%). On the other hand, imports are led by parts and accessories of motor vehicles (13.3%), line telephony (5.7%), motor cars (2.6%) and medicaments (2.2%).

The country's main customers in 2020 were Germany (22.6%), the Czech Republic (10.4%), Poland (7.8%) and France (7.2%). The main suppliers were Germany (18.7%), the Czech Republic (10.1%), China (6.7%), Poland (5.8%) and Vietnam (5.0%).

Slovakia has an overall positive trade balance, though it has been decreasing over the last years and amounted to only 0.9% of GDP in 2020 (World Bank). The total value of merchandise exports - at USD 86.1 billion - decreased by 3.8% year-on-year in 2019, with imports decreasing at a similar pace (-3.9%, at USD 84.4 billion). Concerning commercial services, Slovakia’s exports stood at USD 10 billion, against USD 8.9 billion of imports (-17.9% and -18.6%, respectively - data by WTO). In 2021 Slovakia’s industry-heavy export sector has been hit by severe supply-chain disruptions. As global semiconductor shortages are assumed to persist throughout 2022 the automotive industry production will be affected, resulting in markedly lower export levels. Due to a large share of imported intermediate inputs, weaker exports should also go along with lower import growth, before trade volumes catch up to their previously predicted paths from 2023 onwards.

 
Foreign Trade Indicators 20162017201820192020
Imports of Goods (million USD) 75,47183,30492,90290,00184,464
Exports of Goods (million USD) 77,63484,46993,42589,50986,104
Imports of Services (million USD) 7,9509,37410,96410,9238,889
Exports of Services (million USD) 8,32310,34412,03112,28210,083
Imports of Goods and Services (Annual % Change) 4.83.95.02.1-8.3
Exports of Goods and Services (Annual % Change) 5.03.65.20.8-7.5
Imports of Goods and Services (in % of GDP) 90.893.094.592.084.9
Exports of Goods and Services (in % of GDP) 93.795.296.492.485.7
Trade Balance (million USD) 1,408654-252-1,086758
Trade Balance (Including Service) (million USD) 1,8371,6578472871,969
Foreign Trade (in % of GDP) 184.5188.2190.9184.4170.6

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2020
Germany 22.6%
Czech Republic 10.4%
Poland 7.8%
France 7.2%
Hungary 6.3%
See More Countries 45.7%
Main Suppliers
(% of Imports)
2020
Germany 18.7%
Czech Republic 10.1%
China 6.7%
Poland 5.8%
Vietnam 5.0%
See More Countries 53.6%

Source: Comtrade, Latest Available Data

 
 

Main Products

86.7 bn USD of products exported in 2020
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 28.0%
Parts and accessories for tractors, motor vehicles...Parts and accessories for tractors, motor vehicles for the transport of ten or more persons, motor cars and other motor vehicles principally designed for the transport of persons, motor vehicles for the transport of goods and special purpose motor vehicles of heading 8701 to 8705, n.e.s. 5.7%
Television receivers, whether or not incorporating...Television receivers, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus; video monitors and video projectors 5.0%
Electrical apparatus for line telephony or line...Electrical apparatus for line telephony or line telegraphy, incl. line telephone sets with cordless handsets and telecommunication apparatus for carrier-current line systems or for digital line systems; videophones; parts thereof 4.9%
New pneumatic tyres, of rubberNew pneumatic tyres, of rubber 1.8%
See More Products 54.6%
85.0 bn USD of products imported in 2020
Parts and accessories for tractors, motor vehicles...Parts and accessories for tractors, motor vehicles for the transport of ten or more persons, motor cars and other motor vehicles principally designed for the transport of persons, motor vehicles for the transport of goods and special purpose motor vehicles of heading 8701 to 8705, n.e.s. 13.3%
Electrical apparatus for line telephony or line...Electrical apparatus for line telephony or line telegraphy, incl. line telephone sets with cordless handsets and telecommunication apparatus for carrier-current line systems or for digital line systems; videophones; parts thereof 5.7%
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 2.6%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses incl. those in the form of transdermal administration or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 2.2%
Insulated incl. enamelled or anodised wire, cable...Insulated incl. enamelled or anodised wire, cable incl. coaxial cable and other insulated electric conductors, whether or not fitted with connectors; optical fibre cables, made-up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors 2.2%
See More Products 74.0%

Source: Comtrade, Latest Available Data

 
 

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Main Services

11.2 bn USD of services exported in 2018
29.55%
28.47%
21.52%
12.24%
4.22%
1.14%
1.01%
0.57%
0.50%
0.43%
0.36%
10.5 bn USD of services imported in 2018
28.80%
24.96%
22.81%
8.48%
7.16%
2.60%
1.73%
1.35%
1.17%
0.76%
0.18%

Source: United Nations Statistics Division, Latest Available Data

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Political Outline

Current Political Leaders
President: Zuzana Čaputová (since 15 June 2019)
Prime Minister: Eduard HEGER (since 1 April 2021)
Next Election Dates
Presidential: March 2024
National Council: March 2024
Main Political Parties
Slovakia has a multi-party system, and parties need to work with each other to form coalition governments. The main political parties in the country are:

- Ordinary People and Independent Personalities (OL-NO): catch-all, populist, anti-corruption
- Direction-Social Democracy (Smer-SD): left-wing
- We Are Family (Sme rodina): centre-right
- Freedom & Solidarity (SaS): centre-right, described as euroskeptic
- For the People (Za ľudí): centrist, liberalism
- Slovak National Party (SNS): right wing, nationalist
- Voice – Social Democracy (HLAS-SD): social-democratic, pro-European
- Most-Híd: centre, liberal, looks to expand understanding between ethnic Slovaks and Hungarians
- Christian Democratic Movement (KDH): centre-right
- New Majority (NOVA): centre-right, liberal

Other parties include:

- Progressive Slovakia (PS): social-liberalism, pro-environment
- Slovak Conservative Party (SKS): centre-right, social conservatist
- Party of the Hungarian Community (SMK-MKP): centre-right , hungarian minority
- Together (SPOLU): liberal-conservative

Type of State
Slovakia is a Republic based on parliamentary democracy.
Executive Power
The President is the head of state and is elected by direct universal suffrage for a five-year term renewable once. Following the parliamentary elections, the leader of the majority party or the leader of a majority coalition is usually designated Prime Minister by the President and approved by the National Council with a vote of confidence, to serve a four-year term. The Prime Minister is the head of the Government and enjoys the executive powers, which include implementation of the law in the country and running the day-to-day affairs. The cabinet is appointed by the President on the recommendation of the Prime Minister.
Legislative Power
The legislature is unicameral in Slovakia. The parliament, called National Council, consists of 150 seats; its members are elected on the basis of proportional representation to serve four-year terms. The executive branch of government is directly or indirectly dependent on the support of the National Council, often expressed through a vote of confidence. Legislative power is vested in the National Council. The Prime Minister cannot dissolve the parliament, but the President has the authority to do it if circumstances require so. The people of Slovakia enjoy considerable political rights.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
35/180

Source: World Press Freedom Index, Reporters Without Borders

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
1/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Slovakia, please visit the portal Korona.gov.sk with the official data. Official information on the progress of the epidemic in the country is consolidated by the National Health Information Centre (NHIC).
For the international outlook you can consult the latest
situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures

To find out about the latest public health situation in Slovakia and the current sanitary measures in vigour, please consult the website of the Ministry of Health including the up-to-date information on the containment measures put in place. For further information refer to the website of the Health Policy Institute. Public health recommendations can be found on the portal Korona.gov.sk (in Slovak).

Travel restrictions

The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.

Import & export restrictions

For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the dedicated pages on the website of the Ministry of Economy (in Slovak). Following the measures taken by the European Commission, an export license is required to export personal protective equipment outside of the European Union.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Slovakia on the
International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

To know about the economic measures taken by the Slovak government to address the impact of the COVID-19 pandemic on the national economy, please visit the dedicated pages on the website of the Ministry of Economy (in Slovak). Further information can be retrieved on the website of the national Financial Administration (in Slovak). For an overview in English of the measures, consult the guide by Deloitte.
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the websites of the
European Commission and the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Slovak government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Slovakia in the
IMF’s Policy Tracker platform.

Support plan for businesses

For the information on the local business support scheme and taxation measures established by the Slovak government to help businesses to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the website of the Slovak Investment and Trade Development Agency (SARIO). Further information can be retrieved on the website of the national Financial Administration (in Slovak).
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters

To find out about the support plan for exporters put in place by the Slovak government, please consult the website of the Slovak Investment and Trade Development Agency (SARIO). The national import-export bank EximBanka provides products especially developed to support exporting companies amid the COVID-19 crisis.
The European Commission adopted a
Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak, which enables short-term export credit insurance to be provided by the State where needed.

 

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Latest Update: April 2022