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- GDP (PPP):
- $126.9 billion
- 3.3% growth
- 3.6% 5-year compound annual growth
- $23,304 per capita
- Inflation (CPI):
- FDI Inflow:
Slovakia’s economic freedom score is 68.7, making its economy the 42nd freest in the 2013 Index. Its score has increased by 1.7 points from last year, primarily due to improved management of public spending and labor freedom. Slovakia is ranked 20th out of 43 countries in the Europe region, and its overall score is higher than the world average.
Reversing a declining trend since 2010, Slovakia recorded one of the 20 largest score improvements in the 2013 Index. Nevertheless, it continues to face the economic and political challenges of significant economic adjustments. Fiscal consolidation over the past two years has had only a modest impact, and the government, which must narrow the fiscal deficit to less than 3 percent of GDP in 2013, faces fierce popular resistance to the necessary changes.
Starting in January 2013, taxes are scheduled to rise significantly. Institutional weaknesses continue to constrain Slovakia’s overall economic freedom. The judicial system is slow and vulnerable to political influence, and the perceived level of corruption continues to rise.
After Slovakia became independent in 1993, economic reforms helped to make its economy one of the most attractive in Europe throughout the 1990s. However, the pace of reform has since slowed significantly. 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 Direction-Social Democrat party won 45 percent of the vote in the March 2012 parliamentary elections, and former Direction-Social Democrat Prime Minister Robert Fico returned to office in April 2012. The economy, a mix of agriculture and industry, has registered moderate and relatively stable growth despite the slowdown across the EU, and Slovakia has become one of the world’s largest producers of automobiles per capita.
The judiciary is independent and comparatively effective. Secured interests in property and contractual rights are recognized and enforced. However, court decisions can take years, and the business community views corruption as a significant factor in judicial outcomes. Growing public concern about systemic corruption has given rise to anti-establishment parties.
The income and corporate tax rates were a flat 19 percent as of June 2012, but increases have been enacted. Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden equals 28.4 percent of total domestic income. Government spending has risen to a level equivalent to 37.4 percent of GDP, and the budget deficit has widened to 5.5 percent of GDP. Public debt has risen to about 45 percent of total domestic output.
The overall regulatory framework has undergone a series of reforms aimed at facilitating entrepreneurial activity, but the pace of reform has slowed in recent years in comparison to other emerging economies in the region. The labor market lacks flexibility, resulting in a high unemployment rate of over 10 percent. Despite the challenging economic environment, monetary stability has been relatively well maintained.
Trade policy is the same as that of other members of the European Union, with the common EU weighted average tariff rate standing at 1.6 percent and relatively few non-tariff barriers adding to the cost of trade. Foreign and domestic investment receive equal treatment, and full foreign ownership is permitted in most sectors. The financial system has undergone significant liberalization, and the banking sector remains relatively sound.