Slovakia Country Report by 73E1jI3D


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                               Slovakia: Country Report

The Slovak Republic is a landlocked state in Central Europe. It has a
population of over five million and an area of about 19,000 sq mi. Slovakia is
bordered by the Czech Republic and Austria to the west, Poland to the
north, Ukraine to the east and Hungary to the south. The largest city is the
capital, Bratislava, and the second largest is Košice. Slovakia is a member
state of the European Union, NATO, United Nations, OECD and WTO among
others. The official language is Slovak, a member of the Slavic language
family. The Slovak Republic and the Czech Republic went their separate ways
after 1 January 1993, before that they represented a single country.
Slovakia is a parliamentary democratic republic with a multi-party system.
The last parliamentary elections were held on 12 June 2010 and two rounds
of presidential elections took place on 21 March 2009 and 4 April 2009.

Economic Indicators:
Slovakia entered into the European Exchange Rate Mechanism in November
2005, and joined the European Monetary Union on January 1, 2009.
Headline consumer price inflation dropped from a high of 26% in 1993 to
1.4% in 2009. The current account deficit, including the cost of the second
pension pillar, reached 5.0% in 2008 then moved considerably higher. The
general government deficit for 2010 was forecast at 5.5%, although private
sector analysts expected it to be as high as 7.0%. In 2009 the government
deficit peaked at 7.8% of GDP. Austerity measures adopted during the
Radicova administration were successful in reducing the deficit to 4.6% of


Economic Structure:
GDP - composition by sector:
Agriculture: 3.8%
Industry: 35.5%
Services: 60.7% 2

Metal and metal products; food and beverages; electricity, gas,
coke, oil, nuclear fuel; chemicals and manmade fibers; machinery;
paper and printing; earthenware and ceramics; transport vehicles;
textiles; electrical and optical apparatus; rubber products 3.

    Political Considerations:
Slovakia is a parliamentary democratic republic with a multi-party system.
The last parliamentary elections were held on 12 June 2010 and two rounds
of presidential elections took place on 21 March 2009 and 4 April 20094.
The Slovak head of state is the president (currently Ivan Gašparovič),
elected by direct popular vote for a five-year term. Most executive power lies
with the head of government, the Prime Minister (currently Iveta Radičová),
who is usually the leader of the winning party, but he/she needs to form a
majority coalition in the parliament. The Prime Minister is appointed by the

president. The remainder of the cabinet is appointed by the president on the
recommendation of the prime minister.
The Constitution of the Slovak Republic was ratified 1 September 1992, and
became effective 1 January 1993). It was amended in September 1998 to
allow direct election of the president and again in February 2001 due to EU
admission requirements. The civil law system is based on Austro-Hungarian
codes. The legal code was modified to comply with the obligations
of Organization on Security and Cooperation in Europe (OSCE) and to
expunge      the Marxist-Leninist legal  theory.     Slovakia    accepts  the
compulsory International Court of Justice jurisdiction with reservations.
The president is the head of state and the formal head of the executive,
though with very limited powers. The president is elected by direct, popular
vote, under the two round system, for a five-year term.
Following National Council elections, the leader of the majority party or the
leader of the majority coalition is usually appointed prime minister by the
president. Cabinet appointed by the president on the recommendation of the
prime minister has to receive the majority in the parliament5.

Economic stability:

A very tight monetary policy, one of the lowest inflation rates in Central and
Eastern Europe, and one of the highest GDP growth in the region .Slovakia
has a long tradition of manufacturing excellence and international trade.
Mechanical and electrical engineering for example accounts for almost 20%
of GDO and around a quarter of all exports. Slovakia is ranked 20th out of
43 countries in the Europe region, and its overall score is higher than the
world average. With sound economic fundamentals firmly established,
Slovakia has rebounded relatively quickly from the global economic
slowdown6. The prudent regulatory framework for the financial sector,
combined with competitive tax rates, has fueled Slovakia’s transition into a
flexible and vibrant economy with a considerable degree of resilience.

Foreign investment:
Foreign direct investment (FDI) in Slovakia accounted for much of the
growth in the period 2000-2010. Cheap and skilled labor, low taxes, a 19%
flat tax for corporations and individuals, no dividend taxes, a relatively
liberal labor code, and a favorable geographical location are Slovakia's main
advantages for foreign investors. The main points of economic reform

remained untouched even after the 2006 elections. FDI inflow cumulatively
reached $48.72 billion in 2009; the total inflow of FDI in 2009 was $2.0

Educated work force:

Slovakia has a skilled and educated workforce and has a literacy rate of
99%. Slovakia can also boast positive ratings from the international ratings
community and gained the highest ranking amongst all countries in the CEE
group (World Bank’s Doing Business Report 2011)

Troubled Spots:
High Unemployment Rate: Although the number of people at risk-of-
poverty or social exclusion as measured by the agreed Europe 2020 indicator
has significantly improved in the second half of the past decade, the
unemployment rate among those with lower secondary education or less
remained at 47%, four times the average and the highest in the EU. The
relatively low level of at risk of poverty can be partly explained by the high
growth rates during the 2000s and a relatively low 'risk-of-poverty threshold'
– which is set at 60% of the median disposable income (after social
transfers) – also reflecting the generally low level of wages. Furthermore,
excluded Roma communities living in segregated rural areas are not
necessarily fully captured in official statistics on poverty in Slovakia.

Financial and enterprise sector reforms needed

Financial and enterprise sector reforms - Creditor rights, credit and financial
statement information and corporate governance all need to be
strengthened further; SME sector administrative and structural constraints
need to be addressed8;

Labor market mobility constraints and policies which affect employment
need to be elaborated

Legal/judicial reforms need to be developed and strengthened.

Research and Data Development Provided by: Alexandru Plugari, Research Assistant
Under the Supervision and Coordination of: Dr. Gerard J. Janco, President, Eurasia
Center/Eurasian Business Coalition.


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