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- GDP (PPP):
- $161.0 billion
- 3.6% growth
- 2.4% 5-year compound annual growth
- $29,720 per capita
- Inflation (CPI):
- FDI Inflow:
Openness to global trade and investment, facilitated by improvements in regulatory efficiency, has aided Slovakia’s transition to a more market-based system. Recent changes in corporate taxation include reduction of the top corporate tax rate from 22 percent to 21 percent. Continued transformation and restructuring are needed to capitalize on the well-educated labor force and broaden the production base.
Progress on combating corruption and enhancing the quality of the public sector has been uneven. The judicial system remains inefficient and vulnerable to political interference. Corruption is still perceived as widespread, undermining judicial effectiveness and public trust in government.
After Slovakia gained independence in 1993, market reforms made it one of Europe’s rising economic stars. The country entered the European Union in 2004 and has been part of the eurozone since 2009. Unemployment remains high; 25 percent of young people are unemployed. Prime Minister Robert Fico has been in office since 2012. His center-left Direction-Social Democracy Party lost its parliamentary majority in March 2016 but returned to power as leader of a coalition government with three other parties. Andrej Kiska was elected president in 2014 as an Independent. Slovakia, which has rebuffed EU plans for mandatory migrant quotas, took over the rotating presidency of the Council of the European Union in July 2016.
Secured interests in property and contractual rights are enforced. The constitution provides for an independent judiciary, but despite some reforms, the court system continues to suffer from corruption, intimidation of judges, and a significant backlog of cases. Concerns about corruption and a lack of government transparency contributed to the disappointing election results for the mainstream political parties in the March 2016 election.
The top individual income tax rate is 25 percent, and the top corporate tax rate is 21 percent. Other taxes include a value-added tax and a property tax. The overall tax burden equals 31.0 percent of total domestic income. Government spending has amounted to 42 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.7 percent of GDP. Public debt is equivalent to 52.6 percent of GDP.
The process for launching a private enterprise is more streamlined, and licensing requirements have become less burdensome. The nonsalary cost of employing a worker is moderate. The severance payment system is not burdensome, but regulations on work hours remain relatively rigid. Although fuel prices at the pump are fully liberalized and determined by the market, the government adopted a €50 million “natural gas cash rebate” for households in 2016.
Trade is extremely important to the Slovak Republic’s economy; the value of exports and imports taken together equals 185 percent of GDP. The average applied tariff rate is 1.5 percent. There is no general screening of or discrimination against foreign investment, but state-owned enterprises distort the economy. Most state-owned banks have been sold, and the presence of foreign banks is strong. Capital markets remain relatively small.