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- GDP (PPP):
- $131.9 billion
- 2.0% growth
- 2.0% 5-year compound annual growth
- $24,249 per capita
- Inflation (CPI):
- FDI Inflow:
Slovakia’s economic freedom score is 66.4, making its economy the 57th freest in the 2014 Index. Its score has decreased by 2.3 points from last year, reflecting considerable declines in labor freedom, fiscal freedom, and business freedom that outweigh improvements in trade freedom, freedom from corruption, and investment freedom. Slovakia is ranked 26th out of 43 countries in the Europe region, and its overall score is higher than the world average.
Over the 20-year history of the Index, Slovakia’s economic freedom score has advanced by 6 points. Six of the 10 economic freedoms, including the trade freedom, investment freedom, and financial freedom categories that account for market openness, have advanced by 10 points or more. Overall improvement, however, has been undermined by deteriorations in the rule of law and regulatory efficiency. Slovakia’s economy has generally been rated “moderately free” since 2004.
Deeper systemic reforms to strengthen the legal framework are critically needed to ensure Slovakia’s progress toward greater economic freedom. Although the regulatory environment is generally consistent with a market economy, corruption and red tape slow entrepreneurial dynamism. Regaining fiscal discipline in light of recent large fiscal deficits is another significant challenge.
After independence in 1993, market reforms made Slovakia one of Europe’s most attractive destinations for capital. Initially, however, the pace of reform slowed significantly due to poor monetary policies and cronyism under former Prime Minister Vladimír Meciar (1993–1998). Slovakia joined the European Union and NATO in 2004 and adopted the euro as its currency in 2009. After a political corruption scandal in late 2011, the center-left Social Democrats won 44 percent of the vote in the March 2012 parliamentary elections. Former Prime Minister Robert Fico returned to office in April 2012. Strong automotive and agricultural sectors have enabled moderate economic growth despite the slowdown in many other EU member states.
Corruption is significant, particularly in public procurement and the health care sector. Many state-owned companies do not publish even basic information. The constitution provides for an independent judiciary, but the court system, despite some reforms, continues to suffer from corruption, intimidation of judges, and a significant backlog of cases. Secured interests in property and contractual rights are recognized and enforced.
The top individual income tax rate has risen to 25 percent, and the top corporate tax rate has risen to 23 percent. Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden amounts to 28.8 percent of gross domestic income. Government spending is 38.3 percent of GDP. Public debt has reached half of the size of the domestic economy. The eurozone crisis continues to affect the country’s finances.
The competitive regulatory framework strongly supports commercial activity, but the pace of improvements in regulatory efficiency has slowed in comparison to other economies. The labor market lacks flexibility, contributing to an unemployment rate of over 10 percent. Although the government moved closer to heavily subsidized “single payer” health care in 2013, it also took steps to reduce overly generous renewable-energy subsidies.
EU members have a low 1.1 percent average tariff rate and, in general, few non-tariff barriers to trade. Slovakia’s legal and regulatory systems can be a challenge for foreign investors to navigate. The financial system is still dominated by the banking sector but has become increasingly diversified as insurance and securities companies have grown. Capital markets remain relatively small and continue to evolve.