Slovakia flag Slovakia: Economic and Political Overview

The economic context of Slovakia

Economic Indicators

Slovakia has experienced sustained and steady GDP growth since its integration into the European Union in 2004, except for the financial crisis of 2008-2009, the Eurozone crisis of 2011-2012, and the COVID-19 pandemic. After growing 1.7% in 2022, the Slovak economy decelerated to 1.1% in 2023 due to reduced private and public consumption accompanied by a decline in exports and imports, coupled with inventory reductions, reflecting the weakening economic prospects in its primary export markets (EU Commission). The economic growth outlook for 2024 and 2025 stands at 2.3% and 2.6% respectively. Real wage hikes are expected to bolster private consumption, offering an additional stimulus. Furthermore, the absorption of EU funds is anticipated to significantly contribute to investment growth (EU Commission).

In 2023, the general government budget saw a significant deterioration due to heightened social transfers, raises in public sector wages, increased interest rates, amplified military spending, and temporary measures to support energy schemes benefiting households and firms. The deficit was estimated at 6.5% of GDP by national authorities. The EU Commission raised concerns about the 2024 budget, projecting the deficit at 6.3% in 2024. Similarly, the debt-to-GDP ratio is on an upward trajectory according to Fitch Ratings, which expects it to rise to 62.1% by end-2025 from 57.8% at end-2022. Interest costs, however, are anticipated to increase gradually, attributed to a favorable redemption profile characterized by an average maturity of 8.5 years and predominantly fixed-rate debt structures. As per the EU Commission, inflation surged to 11% in 2023, driven by elevated energy prices and their subsequent influence on other components. In 2024, the inflation rate is projected to decrease to 3.5%, largely due to the anticipated moderation in energy and consumer food prices. However, the persistent effects of energy prices and a constrained labor market are expected to exert upward pressure on prices within the service sector. By 2025, inflation is forecasted to decline further to 2.6%.

The unemployment rate decreased to 6.1% in 2023 (from 6.2% one year earlier) and is expected to hover around 5.9% in the short term, while the labor market remains tight. Overall, around 15.6% of the population is at risk of poverty (especially in the eastern part of the country), less than the EU average of 21.6% (Eurostat, latest data available). The country’s GDP per capita (PPP) was estimated at USD 37,459 in 2022 by the World Bank, 31% below the EU average.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 115.56133.04145.25153.90161.48
GDP (Constant Prices, Annual % Change) 1.71.32.52.82.8
GDP per Capita (USD) 21,26324,47126,71428,31129,719
General Government Balance (in % of GDP) -0.8-3.7-4.3-4.4-4.5
General Government Gross Debt (in % of GDP) 57.856.756.557.560.3
Inflation Rate (%) n/a10.94.82.31.9
Unemployment Rate (% of the Labour Force) 6.26.15.95.95.9
Current Account (billions USD) -9.42-3.55-5.75-5.23-4.36
Current Account (in % of GDP) -8.2-2.7-4.0-3.4-2.7

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

The Slovak Republic boasts a highly qualified labor force of 2.81 million out of its 5.44 million population. The agriculture sector is minimally developed and represents only 2.2% of the GDP and 3% of employment (World Bank, latest data available), although nearly two-fifths of the land is arable. The main agricultural products in the country are cereals, potatoes, sugar beets, and grapes. The mountainous area of Slovakia features vast forests and pastures, which are utilized for intensive sheep grazing, and it is rich in mineral resources including iron, copper, lead, and zinc. According to the second estimate of yield by the Statistical Office of Slovakia, farmers expected to harvest approximately 3.2 million tons of densely sown cereals in 2023, representing an increase of 469,000 tons compared to the previous year. This marks a double-digit year-on-year growth of over 17%, primarily driven by significantly higher yields per hectare, reaching 5.7 tons. These yields surpass the five-year historical average.

The secondary sector represents 28.5% of the GDP and employs 36% of the workforce. Heavy industry sectors - such as metal and steel - are still undergoing a restructuring phase. High-value-added industries, like electronics, engineering, and petrochemicals, are concentrated in the western part of the country. Sectors like automobiles and consumer goods experienced a significant contraction during the pandemic but have started to recover relatively fast and are offering attractive opportunities to foreign investors. Although Slovakia’s competitiveness supports the recovery of the sector, global automotive demand remains sluggish. The World Bank estimates that the manufacturing sector alone accounts for one-fourth of Slovakia’s GDP. Figures from the national statistical office show that industrial production decreased by 0.6% year-on-year in 2023. The automobile industry experienced a year-on-year growth of 4.9%, the highest seen since 2018. Additionally, the manufacture of electrical equipment saw a positive impact with a growth rate of 7.4%. However, the manufacturing of rubber and plastic products witnessed a significant negative influence, declining by 8.9%, while manufacturing computer products experienced a notable 22% decrease.

The services sector contributes 58.5% of the GDP and employs around 62% of the active population. It is dominated by trade and real estate. The development of tourism may also become important for the Slovak economy in the coming years, as it has been one of the country's most dynamic sectors before the outbreak of the COVID-19 crisis. The sector showed signs of recovery in 2023 when accommodation establishments achieved a turnover worth almost EUR 563 million (excluding VAT), representing a year-on-year increase of 30%. The country’s banking sector consists of 26 financial institutions, it is strong and largely owned by foreign groups (mostly from Austria, Italy, and Belgium; whereas only four are owned by Slovakians, of which one is controlled by the government – data EBF). In 2023, turnover in retail trade reached a 4.5% lower value in constant prices than in 2022 (Statistics Slovakia).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.5 36.7 60.8
Value Added (in % of GDP) 2.2 28.6 58.3
Value Added (Annual % Change) 2.3 -0.4 2.5

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

Find more information about your business sector on our service Market reports.

 
 

Find out all the exchange rates daily on our service International currency converter.

 

Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
66,3/100
World Rank:
61
Regional Rank:
33

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
6.88/10
World Rank:
37/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

 

Country Risk

See the country risk analysis provided by Coface.
 

Return to top

 

Return to top

Any Comment About This Content? Report It to Us.

 

© eexpand, All Rights Reserved.
Latest Update: May 2024

Return to top