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Slovakia Economy


Slovakia is rapidly becoming a developed country, with the highest sustained GDP growth in the European Union, reporting 10.4% in 2007 and the highest rating from V4 countries. Slovak economy is considered a tiger economy known as Tatra Tiger. Slovakia has been a EU member state since 2004 and adopted the euro currency at the beginning of 2009. Its capital, Bratislava, is the largest financial centre in Slovakia. Unemployment has fallen considerably, although long-term unemployment remains stubbornly high. In the long term, improving education outcomes, including by reducing the impact of socio-economic background on outcomes, will be central to sustaining high economic growth and social cohesion. GDP per capita at purchasing power parity was $22,600 in 2008, which is 70% of the EU average.

Slovak service sector grew rapidly during the last 10 years and now employs about 44% of the population and contributes with over 66% to GDP. Slovakia's tourism has been rising in recent years, incomes has doubled up from $640 millions in 2001 to $1.2 billions in 2005. However, this sector still remains underdeveloped in comparison with neighbour countries.

Slovakia became industrialised mostly in the 20th century. Heavy industry (including coal mining and the production of machinery and steel) was built for strategic reasons because Slovakia was less exposed to the military threat than the western parts of Czechoslovakia. after the end of the Cold War, importance of industry, and especially of heavy industry, declined. In 2005, industry (including construction) accounted for 28.7% of GDP, compared with 49% in 1990. Nowadays, building on a long-standing tradition and a highly skilled labour force, main industries with potential of growth are in the following sectors: automotive, electronics, mechanical engineering, chemical engineering, information technology. The automotive sector is among the fastest growing sectors in Slovakia due to the recent large investments of Volkswagen (Bratislava), Peugeot (Trnava), and Kia Motors (Žilina). Passenger car production was 295,000 units in 2006, a figure which will double when Kia's factory reaches full capacity. By 2009 therefore Slovakia will have the highest per capita car production in the world. Other big industrial companies include US Steel (metallurgy), Slovnaft (oil industry), Samsung Electronics (electronics), Sony (electronics), Mondi Business Paper (paper), Hydro Aluminium (aluminum production), and Whirlpool. In 2006, machinery accounted for more than a half of Slovakia's export.

In 2005, agriculture accounted for 3.4% of GDP (compared to 6.9% in 1993) and occupied about 4.7% of the labour force (down from 10.2% in 1994). Over 40% of the land in Slovakia is cultivated. The southern part of Slovakia (bordering with Hungary) is known for its rich farmland. Growing wheat, rye, corn, potatoes, sugar beets, grains, fruits and sunflowers. Vineyards are concentrated in Little Carpathians, Tokaj, and other southern regions. The breeding of livestock, including pigs, cattle, sheep and poultry is also important.

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.


Economy - overview
Slovakia has made significant economic reforms since its separation from the Czech Republic in 1993. Reforms to the taxation, healthcare, pension, and social welfare systems helped Slovakia to consolidate its budget and get on track to join the EU in 2004 and to adopt the euro in January 2009. Major privatisations are nearly complete, the banking sector is almost entirely in foreign hands, and the government has helped facilitate a foreign investment boom with business friendly policies such as labour market liberalisation and a 19% flat tax. Foreign investment in the automotive and electronic sectors has been strong. Slovakia's economic growth exceeded expectations in 2001-08 despite the general European slowdown. Unemployment, at an unacceptable 18% in 2003-04, dropped to 7.4% in 2008 but remains the economy's Achilles heel. Despite its 2006 pre-election promises to loosen fiscal policy and reverse the previous DZURINDA government's pro-market reforms, FICO's cabinet has thus far been careful to keep a lid on spending in order to meet euro adoption criteria and has focused on regulating energy and food prices instead. The OECD expects Slovakia's GDP growth to be positive in 2009.

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