Slovakia: Economic and Political Overview
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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 and the Eurozone crisis of 2011-2012. In recent years, the Slovak economy had returned to growth, fuelled by the return of internal and European demand. Nevertheless, the outbreak of the COVID-19 pandemic and the global crisis it caused pushed the country into a recession in 2020. The economy returned to growth in 2021 (+3%) and recorded an estimated growth of 1.8% in 2022 as high inflation weighed on private consumption and the weak performance of major export destinations hampered foreign trade, with the overall balance of trade turning negative for the first time in 14 years. For 2023, the IMF forecasts GDP growth at 1.5% driven by public investment (underpinned by plans to absorb EUR4 billion in Multi-Annual Financing Framework funds). Private consumption is expected to regain momentum only in 2024, the same as for exports, resulting in a projected growth rate of 3.4%.
In 2022, the general government budget was affected by a series of one-off measures (with energy support totalling EUR 5.5 billion), as well as by higher permanent spending both in terms of wages and transfers (including a family package costing 1% of GDP), resulting in an overall deficit of 3.3% of GDP (Fitch Ratings). For 2023, the deficit is expected to widen to 5.6% as windfall profits and EU funds will only offset some of the additional expenditure. The debt-to-GDP ratio was estimated at 60.5% in 2022 by the IMF and is expected to follow a downward trend over the forecast horizon (at 57.4% this year and 56.2% in 2024). Debt dynamics should be supported by nominal growth and stable debt-servicing costs. Inflation soared to over 11.9% in 2022 due to high energy prices and the pass-through to core components, especially food. Food prices are expected to keep pushing inflation in 2023, with a projected rate of 10.1%, before inflation gradually eases to 4.4% the following year (IMF).
The unemployment rate decreased to 6.2% in 2022 (from 6.8% one year earlier). The labour market remains tight and is set to contribute to more persistent growth of prices in the service sector in 2023. Overall, around 15.6% of the population is at risk of poverty (especially in the eastern part of the country), below the EU average of 21.7% (Eurostat, latest data available). The country’s GDP per capita (PPP) was estimated at USD 38,620 in 2022 by the IMF, 28.4% below the EU average.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 106.61 | 116.61 | 113.53 | 127.53 | 135.62 |
| GDP (Constant Prices, Annual % Change) | -3.4 | 3.0 | 1.7 | 1.3 | 2.7 |
| GDP per Capita (USD) | 19,534 | 21,357 | 20,890 | 23,458 | 24,943 |
| General Government Balance (in % of GDP) | -2.2 | -1.5 | -1.4 | -2.9 | -3.9 |
| General Government Gross Debt (in % of GDP) | 58.9 | 62.2 | 58.8 | 57.4 | 57.4 |
| Inflation Rate (%) | 2.0 | 2.8 | 12.1 | 9.5 | 4.3 |
| Unemployment Rate (% of the Labour Force) | 6.6 | 6.8 | 6.1 | 6.0 | 5.9 |
| Current Account (billions USD) | 0.59 | -2.92 | -4.87 | -4.42 | -3.50 |
| Current Account (in % of GDP) | 0.6 | -2.5 | -4.3 | -3.5 | -2.6 |
Source: IMF – World Economic Outlook Database, October 2021
The Slovak Republic has a highly qualified labour force of 2.76 million out of its 5.4 million population. The agriculture sector is little developed and represents only 1.7% of the GDP and 3% of employment (World Bank, latest data available), although almost 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 has vast forests and pastures, which are used for intensive sheep grazing, and it is rich in mineral resources including iron, copper, lead, and zinc. According to the latest data by Eurostat, 25.4% of the Slovak agricultural output derives from cereals, followed by 15.2% from industrial crops (oil seeds, sugar beet), 12.7% from dairy, 6.7% from pig production and 6% from cattle production. The latest estimates from Statistics Slovakia show that because of several droughts, in 2022 all types of crops recorded a decline: corn for grain in 2022 will be the lowest in the last 15 years, at approximately 740 thousand tons. The harvest was estimated to reach a value almost 54% lower than that of the previous year.
The secondary sector represents 28.2% of the GDP and employs 36% of the workforce. Heavy industry sectors - such as metal and steel - are still in a restructuring phase. High-value-added industries, like electronics, engineering, and petrochemicals, are installed in the western part of the country. Sectors like automobile and consumer goods experienced a sizeable 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 4.7% year-on-year in 2022. According to the main industrial groupings, production related to energy decreased by 20.4%, production of durable consumer goods by 4%, production for intermediate goods by 3.2% and production of capital goods by 1.2%. Production of non-durable consumer goods increased by 5.2%.
The services sector contributes 59.1% of the GDP and employs around 61% 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 2022, when accommodation establishments achieved a turnover worth almost EUR 434 million (excluding VAT), almost doubling the level of the previous year. 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).
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 2.8 | 36.1 | 61.1 |
| Value Added (in % of GDP) | 1.7 | 28.2 | 59.1 |
| Value Added (Annual % Change) | -5.4 | 2.5 | 2.2 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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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.}}
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Source: Index of Economic Freedom, Heritage Foundation
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Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025
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Latest Update: September 2023
