Slovakia Economy Facts
Thanks to large foreign investment in industry, the Slovak economy has grown steadily since 1993, with the exception of the crisis year 2009. In 1989–2012, gross domestic product (GDP) increased by 168 percent.
Economic growth was already picking up at independence in 1993, but the major turning point came in 1998 when Mikuláš Dzurinda’s right-wing government came to power. Until then, the country had large deficits in the state budget and in the trade and current account balance. Dzurinda raised the VAT and imposed a temporary import tax. Prices for electricity, water, telecommunications and transport were increased, while savings were made in the state budget. The budget deficit fell and growth was higher than expected. However, central government debt continued to be a problem and corresponded to 50 percent of GDP in 2000. Inflation also rose and unemployment remained at a high level. Wages were low by European standards and most Slovaks had seen their standard of living fall during the second half of the 1990s. Corruption was also a significant problem.
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At the beginning of the 2000s there was a marked improvement in the economy. Foreign investment accelerated, as did privatization. Several state-owned large companies were sold to foreign companies, including the steel mill VSZ, which was purchased by US US Steel. Foreign capital also contributed to the building of large car factories. In 2004, the privatizations of the large companies had largely been completed. A large part of the business sector, including most of the banking sector and the largest industries, now has foreign owners.
After the 2002 election, Dzurinda imposed a 19 percent unit tax on income, goods and services. The aim was to attract Western European companies and investors to the country by means of low wages and low taxes. Stock dividends, inheritances, gifts and capital gains were completely tax exempt.
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The economic upswing continued when Slovakia joined the EU in 2004. The country also benefited from being close to several growing markets and the availability of well-educated labor. Slovakia had the highest growth in Europe in 2007, at almost 11 percent. At the same time, both inflation and government debt fell.
However, good economic growth has not benefited everyone. The regional differences are large. Growth has mainly occurred in the regions around the capital Bratislava, while parts of eastern Slovakia are significantly poorer and unemployment is high there.
Large industrial companies, mainly the manufacture of cars, home electronics, steel and aluminum, are of great importance to the economy. Slovakia is today the world’s largest car manufacturer per inhabitant.
However, from the autumn of 2008, Slovakia was hit by the global financial crisis and in 2009 GDP fell by almost 5 percent. But a year later, the economy had turned upwards and in 2011 growth was just over 3 percent.
The budget deficit in 2011 amounted to almost 5 per cent of GDP, which was in line with the goals of the then right-wing government, while inflation remained around 4 percent. However, the crisis year 2009 left its mark, in the form of a rising government debt. In 2011 it corresponded to just over 43 percent of GDP.
FACTS – FINANCE
GDP per person
US $ 19 547 (2018)
US $ 106,472 million (2018)
4.1 percent (2018)
Agriculture’s share of GDP
3.0 percent (2018)
Manufacturing industry’s share of GDP
20.0 percent (2018)
The service sector’s share of GDP
55.5 percent (2018)
2.6 percent (2019)
Government debt’s share of GDP
48.9 percent (2018)