SLOVAKIA
Economy
Economy
Cities in SLOVAKIA
| Bratislava |
Economy
General
Until 1990, Slovakia had a socialist economic system, whose means of production were state or collective property. From 1990 onwards, privatisation was initiated, especially for the larger enterprises. However, privatisation was initially not very successful in Slovakia.
Another measure was the liberalisation of prices, which led to a sharp rise in inflation. Trade with the former COMECON countries fell sharply and, in addition, oil imports from the Soviet Union fell by more than 25%, so that Slovakia now had to buy its oil on the much more expensive world market.
Slovakia was traditionally a poor agricultural area, but after the Second World War, a large heavy industry was built up in the country, among others around Košice. Especially the arms industry, with the city of Martin as its centre, was important to the economy, but after the 'velvet revolution' in 1989 the arms industry, which employed 10% of the Slovakian labour force, collapsed, also because the Czechoslovakian government suspended arms exports in 1991. Slovak industry, which is highly intertwined with that of the neighbouring Czech Republic, suffered greatly from the economic recession and the collapse of the Soviet market.
After a period of relative stagnation in the early and mid-1990s, reforms to taxation, healthcare, pensions and the social security system helped Slovakia join the EU in 2004. In January 2009 Slovakia adopted the euro as its currency. Privatisation is almost complete, the banking sector is almost entirely foreign-owned and the government has facilitated foreign investment. Foreign direct investment, especially in automobiles and electronics, provided much of the economic growth until 2008. Cheap skilled labour, low taxes, no dividend tax, a relatively liberal labour code and a favourable geographical location are Slovakia's main advantages for foreign investors. From 2009, Slovakia also had to deal with the consequences of the credit crisis. Corruption and slow dispute resolution remain major factors limiting economic growth. Economic growth in 2017 was 3.4%. GDP per capita in that year was $33,100.
Agriculture, animal husbandry and forestry
Agriculture accounts for about 3.8% of GDP and employs 3.9% of the population. This is despite the major turnaround, which has been underway since 1989, but more slowly in Slovakia than in the Czech Republic. Until 1989, 95% of exploitable land belonged to state-owned companies, which were heavily subsidised but could cover at least 98% of domestic needs. Since then, land has had to be returned to its original owner, the subsidy policy has been reformed and all agriculture has had to adapt to the free market economy. The main crops grown in the fields are cereals, sugar beet, potatoes and oilseed crops.
Slovak agriculture is not doing badly at the moment. There are about 1,400 farms and more than 20,000 self-employed people active in agriculture in Slovakia. The average wage in agriculture is still very low compared to other sectors.
About 50% of the agricultural imports come from the European Union, especially from Germany, France, Austria, Italy and the Netherlands. Important export products from the Netherlands to Slovakia are residues from the food industry, cut flowers, plants and seeds.
Although livestock farming extends to cows and sheep, the emphasis is on pigs and chickens.With 1.9 million ha of forest (38% of the whole country), Slovakia is one of the most forested countries in Europe. Of these, 1.5 million ha are exploited. Since 1990, ownership has been returned to the original owners, in other cases redistributed among cities, municipalities and the churches.
About 500 companies are active in wood processing. The large amount of residues and waste from the woodworking industry and agriculture make biomass the largest potential source of alternative energy.
Mining and energy
Most of the raw materials have to be imported. Copper, lead, salt and petroleum are extracted, and iron ore, silver, tin and lignite are also present. The mining centre is located in the Slovakian Ore Mountains, where iron ore, copper and magnesite are extracted.
Slovakia depends on imports, especially from Russia, for about 80% of its energy needs. The prices that now have to be paid are at the level of the world market, which means that the price for consumers is constantly rising.
Most of the energy is generated in coal-fired power stations, but hydroelectric and nuclear power stations are also of great importance.
The most important sources for generating electricity are nuclear power (approx. 50%), fossil fuels (approx. 30%) and hydropower (20%). Hydropower in particular is a lucrative domestic source. The Gabcikovo power station on the Danube is the largest producer of hydroelectricity. More than 85% of electricity is generated by the state-owned Slovenské Elektrárne, which is to be privatised. Regional distributors are being taken over by foreign investors.
The main domestic energy source is (brown) coal. Coal reserves are estimated at around 190 million tonnes. Although the costs of lignite mining are actually too high and the use of lignite is very polluting, the supply of lignite to energy producers continues because of the large number of jobs (approx. 10,000 employees).
For natural gas, they are almost entirely dependent on Russian imports. Slovakia also plays a very important role in the transit of Russian gas to neighbouring and Western European countries.
Like natural gas, oil stocks are not sufficient to meet domestic demand. Slovakia is a major importer of oil from Russia and an important transit country for Russian oil to Western Europe and Mediterranean countries.
Slovakia has two nuclear power plants: Mochovce and Jaslovske Bohunice. They provide about 50% of the electricity, which is also very cheap. Due to the ageing of the plants, investments in modernisation are very necessary.
Geothermal energy has good prospects in Slovakia thanks to its 26 high-quality hot springs. Hydropower production could increase even more by expanding more small-scale hydropower facilities from the current 5% to 10-15%.
Industry
Industry provides 35% of GDP (2017) and 22.7% of the population is employed in this sector. The chemical industry is important for Slovakia. Most people work in the production of basic chemicals, chemical products and fibres. The production companies of rubber and plastics are much smaller in scale. Many companies have no specialisation and offer a wide range of products. There is a strong demand for modern machinery and production technology. However, domestic machinery products for this sector are scarce, so 75-80% of the machinery is imported.
With the collapse of the Eastern Bloc market and the years of transformation of the economy, the electronics industry had a hard time. With the help of foreign investment, there has been an increase in growth, revenue and turnover for some years now. The result of this development was that the electronics sector had the most companies with a significant proportion of foreign capital.
The backbone of the Slovak electronics industry is the production of electronic machines and equipment, then televisions, conductors and measuring equipment. Imports of electronics (from the Czech Republic and Germany in particular) are also increasing every year. The main imported products are computers, control equipment, electric motors, transformers, electrical equipment for motors and other means of transport, insulated wires and cables, and measuring, control and testing equipment.
Slovakia's strongest industrial sector is the machinery industry. Its production amounts to about a quarter of total industrial output. More than 500 companies with more than 25 employees are active in this sector, employing around 100,000 people in total. The current growth is mainly due to the favourable development of the automobile industry.
Machines and machine parts also form an important part of the imported industrial products. The most important imported products are mainly car parts and furthermore engines and turbines, measuring, control and navigation equipment, production machines, bearings and couplings, connecting materials, chains and metal springs, locks, metal constructions and heating and cooling equipment. There is also a market for second-hand machines in Slovakia. The main importing countries are Italy, Austria, France, Germany and the Czech Republic.
One of the fastest growing sectors of the Slovak economy is the automotive industry, already accounting for more than 20% of industrial production. The best-selling brands were Skoda, Renault and Volkswagen.
Like other sectors, the construction industry has undergone major restructuring. Large state-owned companies fell apart into a large number of small businesses (about 4500) and sole traders (about 37,000). In the long run, the huge shortage of good housing is favourable for the Slovak construction industry. Private home ownership is promoted by the government through subsidies and more and more banks offer mortgages. The construction of shopping centres, hypermarkets and supermarkets is also expected to grow in the coming years, as is the construction of motorways and other transport projects. Renovation and modernisation (e.g. insulation) of homes will also create a lot of work and employment for companies.
Trade
Slovakia's trade balance was stable in 2017. It exported $81 billion and imported $80 billion. The Slovak export market shifted from East to West after 1993, with the countries of the European Union as the main trading partners. Trade with the Czech Republic still occupies an important place and is still increasing in value. In 2017, the main import partners were Germany, the Czech Republic, Russia and Austria and Hungary. The main export partners were Germany, the Czech Republic, Poland, Hungary and Austria.
Slovak imports currently consist mainly of machinery, transport equipment, semi-finished products, textiles and basic metals. The main export products are transport equipment, machinery and semi-finished products and basic metals.
Services sector
As in most countries, the service sector is becoming increasingly important for the Slovak economy, already accounting for 61.2% of GDP (2017).
Since 1 January 1993, the National Bank of Slovakia has operated as an independent central bank. The privatisation of the Slovak banking sector has allowed foreign banks to enter the market and foreign investors to control almost the entire banking sector.
The largest banks are: Všeobecná Úverová Banka (bought by Italian IntesaBci in 2001), Slovenská Sporitel'na (bought by Austrian Die Erste Bank in 2001) and Ivesticná a Rozvojová Banka. The other banks are much smaller and the best known is Tatra Bank, which is owned by the Austrian Raiffeisen Zentralbank.
Leasing has become very popular since 2000, especially financial leasing where there is an option to buy at the end of the contract period. In Slovakia, leasing is considered an alternative way of financing, which still allows small and medium-sized enterprises to acquire new machinery, for example.
ICT sector and e-business
Spending on information and communication technology (ICT) is rising sharply in Slovakia. The information technology sector provides many jobs. Expenditure on software is rising spectacularly.
The Slovakian telecommunications sector is developing strongly. Slovakia has an alternative telecommunications network in the form of a fibre optic network. The network is located along gas pipelines in Slovakia, and is mostly used for data transmission and leased by the energy companies to Internet companies and a foreign telecom company.
Electronic business in Slovakia consists of both "business to business" and "business to consumer". The latter segment is more developed than the former.
Traffic
The total road network amounts to about 25,000 km, of which a small part is motorway. It leads from the capital to the Czech border and to the north. New are motorways to Poland and part of the Vienna-Budapest connection. The road network is in a relatively good state and several hundred kilometres of additional motorways are being built. This is being financed by the EU Phare programme, among others. Priority is given to those roads that connect with the European road network. Slovak road hauliers are gaining a share in international transport.
However, this is at the expense of more environmentally friendly transport options. The railways are loss-making and outdated, but they are still an important means of transport for both passengers and goods. The Slovak railways are almost 3700 kilometres long, of which about 1500 kilometres are electrified.
International air traffic is mainly handled at Schwechat airport, 40 km from Bratislava. It is estimated that approximately 75% of the goods from Slovakia destined for air transport are transported via Vienna Airport. Schwechat is also widely used for passenger transport to and from Slovakia.
Especially for domestic air connections, some private companies operate from five airports, namely Bratislava, Piest'any, Banska Bystrica, Košice and Presov.
Slovakia has three ports on the Danube, Bratislava, Sturovo and Komárno. With the completion of the Rhine-Main-Danube, Slovakia has access to European waterways and the ports can be reached even from the Netherlands.
Sources
Lacika, J. / Tatras
Bolchazy-Carducci Publishers, Inc
Meyer, M. / Tsjechië, Slowakije
ANWB
Samuhel, S. / Mountain walks in the High Tatra
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Wilson, N. / Czech & Slovak Republics
Lonely Planet
CIA - World Factbook
BBC - Country Profiles
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