Slovakia

Capital: Bratislava

Local time:
It is %T:%M %A in Bratislava

GDP growth rate: 4.3% in 2013

FDI stock: 50 678 million USD in 2010

Economic trends

Since 2000, Slovakia has been experiencing a sustained and steady GDP growth rate, notably induced by its integration into the European Union in May 2004. The taxation system is well-adapted to the needs of trade and the workforce is highly qualified. The country also benefits from an advantageous geographical location, being located at the crossroads of Central Europe. The budgetary deficit is in constant decrease, mainly due to the major structural reforms set in place in the preparation process to its integration into the eurozone.

However, the Slovak economy has been affected by the financial crisis of 2008-2009, followed by the crisis in the eurozone deepening in 2011. As a member of the eurozone since 2009, Slovakia suffered an overall slowing down of th eeconomy. After having registered growth of 4% in 2010, it contracted to 3% in 2011 (which nonetheless still remains one of the highest growth rates among the Central European countries) and should further slow down to 1% in 2012.

The Slovak economy is also negatively affected by weak domestic demand, with its construction sector in crisis and a continued decrease in consumer spending (-3% in 2011). Inflation rose to 4% in 2011 and unemployment continues to surge despite positive economic growth, reaching 13.4% in 2011. The country's debt is expected to reach 45% of GDP in 2012. Indeed, much of the Slovak foreign debt (45%) depends on the eurozone, with only exports driving growth. They should remain dynamic in 2012, depending on the economic dynamism of its European partners.

Main branches of industry

The agriculture sector is not much developed in Slovakia and it represents less than 3.5% of the GDP. 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.

The secondary sector represents about a third of the GDP. The heavy industry sector such as metal and steel are still in a restructuring phase. High value-added industries such as electronics, engineering and petro-chemicals are installed in the western part of the country. Some sectors, like the automobile and consumer goods, offer attractive investment opportunities to foreign investors.

The services sector represents about 60% of the GDP. It is dominated by trade and real estate. The development of tourism can also become an important sector for the Slovak economy in the next following years. Already in 2011 it was among the most dynamic sectors of the Slovak economy.

International trade

Slovakia's strong industrial tradition, tax incentives, a still inexpensive and skilled workforce, its rapidly developing infrastructure boosted by an influx of EU funds and a fragile but real growth make the country a place of predilection for trade. Since 2009, the economic growth of Slovakia has been driven by its exports. These amounted to almost 2 billion euros in 2011 and should remain high in 2012. The share of foreign trade inthe  GDP of the country, which exceeded 100% in 2010, too remains very important.

Slovak trade balance is in deficit, mainly because of energy imports from Russia and the substantial imports of machinery and electrical and electronic equipment used in the automotive and energy sectors. Nevertheless, the dynamism of the tertiary sector is expected to eventually improve this situation.

The top three import partners are Germany, the Czech Republic and Russia. Its three main customers are Germany, the Czech Republic and Austria. The European crisis has accentuated the country's exposure since more than a third of its exports depend on the eurozone.