Slovakia - Economy

Economy

The Slovak economy is considered an advanced economy, with the country dubbed the "Tatra Tiger". Slovakia transformed from a centrally planned economy to a market-driven economy. Major privatizations are nearly complete, the banking sector is almost completely in private hands, and foreign investment has risen.

Before the global recession, Slovakia had experienced high and sustained economic growth. In 2007 (with the GDP growth of 10.5%), 2008 (with 5.8%) and 2010 (with 4.2%), Slovakia was the fastest growing economy in the European Union. In 2011 (with the GDP growth of 3.3%), Slovakia was the 2nd fastest growing Eurozone member (after Estonia). According to the European Economic Forecast, released by the European Commission in the spring 2012, Slovakia's predicted growth of 1.8% in 2012, will be the highest in the Eurozone and 4th highest in the EU-27.

Ratio of government debt to GDP in Slovakia is 41 percent according to Eurostat newsrelease published at 21 October 2011, which is the 4th lowest in the Eurozone.

Unemployment, peaking at 19.2% at the end of 1999, decreased to 7.51% in October 2008 according to the Statistical Office of the Slovak Republic. In addition to economic growth, migration of workers to other EU countries also contributed to this reduction. According to Eurostat, which uses a calculation method different from that of the Statistical Office of the Slovak Republic, the unemployment rate in September 2012 is at 13.9% the third highest in the Eurozone (after Spain and Portugal).

Inflation dropped from an average annual rate of 12.0% in 2000 to just 3.3% in 2002, the election year, but it rose again in 2003–2004 because of rising labor costs and excess taxes. It reached only 1% in 2010 which is the lowest recorded rate since 1993. The ratio was at 3.9% in 2011.

Slovakia adopted the Euro currency on 1 January 2009 as the 16th member of the Eurozone. The euro in Slovakia was approved by the European commission on 7 May 2008. The Slovak koruna was revalued on 28 May 2008 to 30.126 for 1 euro, which was also the exchange rate for the euro.

Slovakia is an attractive country for foreign investors mainly because of its low wages, low tax rates and well educated labour force. In recent years, Slovakia has been pursuing a policy of encouraging foreign investment. FDI inflow grew more than 600% from 2000 and cumulatively reached an all-time high of $17.3 billion in 2006, or around $22,000 per capita by the end of 2008.

Despite a sufficient number of researchers and a decent secondary educational system, Slovakia, along with other post-communist countries, still faces major challenges in the field of the knowledge economy. The business and public research and development expenditures are well below the EU average. The Programme for International Student Assessment, coordinated by the OECD, currently ranks Slovak secondary education the 30th in the world (placing it just below the United States and just above Spain).

In March 2008, the Ministry of Finance announced that Slovakia's economy is developed enough to stop being an aid receiver from the World Bank. Slovakia became an aid provider at the end of 2008.