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Economy of Slovakia

Economy - overview: Slovakia continues the difficult transition from a centrally planned economy to a modern market economy (a reform slowed in the 1994-98 period due to the crony capitalism and other fiscal policies of Prime Minister Vladimir Meciar's government). While economic growth and other fundamentals improved steadily during Meciar's term, public and private debt and trade deficits soared, and privatization, often tarnished by corrupt insider deals, progressed only in fits and starts. Real annual GDP growth peaked at 6.5% in 1995 but declined to 1.3% in 1999. For all of 2002, real GDP rose 4.4%.

Slovakia started 1999 faced with a sharp slowdown in GDP growth, large budget and current account deficits, fast-growing external debt, and persisting corruption, but made considerable progress toward achieving macroeconomic stabilization later in the year. Tough austerity measures implemented in May cut the overall fiscal deficit from 6% in 1998 to under 4% of GDP, and the current account deficit was halved to an estimated 5% of GDP. Slovakia was invited by the European Union in December to begin accession negotiations early in 2000. Foreign investor interest, although rising, has not yet led to actual deals; several credit rating agencies have upgraded their outlook for the country. However, Slovakia's fiscal position remains weak; inflation and unemployment remain high; and the government is only now addressing the structural problems inherited from the Meciar period, such as large inefficient enterprises, an insolvent banking sector and high inter-company debts, and declining tax and social support payments. Furthermore, the government faces considerable public discontent over the government's austerity package, persistent high unemployment - which reached an all-time high of 20% in December 1999 - rising consumer prices, reduced social benefits, and declining living standards.

Economic growth is expected to accelerate to 4.0% in 2002 and 4.1% in 2003. Headline consumer price inflation dropped from 26% in 1993 to an average rate of 5.8% in 1996, but later picked up to 8.4% in 2000, driven by liberalization of subsidized prices of utilities. The inflation trend in 2002 was largely affected by the government's reluctance to continue price deregulation due to the election season. The 2002 inflation rate should hit all-time lows at 3.5%-4.9%. This trend will likely reverse in 2003, with hikes in administrative prices put back on track, pushing inflation back to its 2001 level, about 6.4%.

After economic stabilization in 1999 and 2000, Slovakia's current account balance brought a deficit of 8.8% of GDP in 2001, the largest number in the country's history, compared with 3.7% in 2000. Foreign trade shortfall was the primary driver. Slovakia had a $2.2 million trade deficit in 2001. Gross foreign debt was about $11 billion at the beginning of 2002, roughly 55% of GDP.

Slovakia still continues to have relatively small foreign direct investment (FDI), although the Dzurinda government has opened doors for foreign investors and introduced competitive incentives schemes. FDI in 2000 alone exceeded cumulative investment received by the country in the 10 preceding years. This was boosted by large privatization receipts. As of 2001, Slovakia has enjoyed per capita FDI of $889.

Germany is Slovakia's largest trading partner, purchasing about 27% of Slovakia's exports and supplying 25% of its imports in 2001. Other major partners include the Czech Republic (15% imports; 17% exports), Austria (4%; 8%), Russia (15%; 1%), and Italy (6%; 9%). Slovakia imports nearly all of its oil and gas from Russia. Slovakia's export markets are primarily Organization for Economic Cooperation and Development (OECD) and European Union countries. In 2000, Slovakia received an invitation to join the OECD as its 30th member. More than 50% of its trade is with EU members. The United States accounts for about 2% of total trade with Slovakia. The Slovak Republic has most favored nation status and receives duty free (GSP) benefits for many of its products.

GDP: purchasing power parity - - $66 billion (2002 est.)

GDP - real growth rate: 3.3% (2001) 4.4% (2002)

GDP - per capita: purchasing power parity - $12,200 (2002 est.)

GDP - composition by sector:
agriculture: 4.5%
industry: 34.1%
services: 61.4% (2000)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: 5.1%
highest 10%: 18.2% (1992)

Inflation rate (consumer prices): 6.4% (end of 2002)

Labor force: 3 million (1999)

Labor force - by occupation: industry 29.3%, agriculture 8.9%, construction 8%, transport and communication 8.2%, services 45.6% (1994)

Unemployment rate: 17.4% (December 31 2002), 14,5% (July 31 2003)

revenues: $5.2 billion
expenditures: $5.6 billion, including capital expenditures of $NA (1999 est.)

Industries: 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

Industrial production growth rate: 4.4% (2002 est.)

Electricity - production: 30.29 billion kWh (2001)

Electricity - production by source:
fossil fuel: 30.3%
hydro: 16%
nuclear: 53.7%
other: 0% 2000)

Electricity - consumption: 24.41 billion kWh (2001)

Electricity - exports: 5.141 billion kWh (2001)

Electricity - imports: 1.381 billion kWh (2001)

Agriculture - products: grains, potatoes, sugar beets, hops, fruit; pigs, cattle, poultry; forest products

Exports: $12.9 billion f.o.b. (2002 est.)

Exports - commodities: machinery and transport equipment 39.4%, intermediate manufactured goods 27.5%, miscellaneous manufactured goods 13%, chemicals 8% (1999)

Exports - partners: EU 59.9% (Germany 27.0%, Italy 8.8%, Austria 8.1%), Czech Republic 16.6% (2001)

Imports: $15.4 billion f.o.b. (2001 est.)

Imports - commodities: machinery and transport equipment 37.7%, intermediate manufactured goods 18%, fuels 13%, chemicals 11%, miscellaneous manufactured goods 9.5% (1999)

Imports - partners: EU 49.8% (Germany 24.7%, Italy 6.4%), Czech Republic 15.1%, Russia 14.8% (2001)

Debt - external: $9.6 billion (2002 est.)

Economic aid - recipient: ODA $113 million (2000), $92 million EU structural adjustment funds (2000 est.)

Currency: 1 koruna (Sk) = 100 halierov

Exchange rates: koruny (Sk) per US$1 - 37,958 (2003 till Sept 12), 45.3267 (2002), 48.3548 (2001), 46.0352 (2000), 41.3628 (1999), 35.2334 (1998), 33.616 (1997), 30.654 (1996), 29.713 (1995)

Fiscal year: calendar year

See also : Slovakia