Download PDF
Quick Facts
- Population:
- GDP (PPP):
- $198.4 billion
- 2.3% growth
- 3.3% 5-year compound annual growth
- $34,178 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
Slovakia’s economic freedom score is 66.3, making its economy the 61st freest in the 2021 Index. Its overall score has decreased by 0.5 point, primarily because of a decline in the score for government spending. Slovakia is ranked 33rd among 45 countries in the Europe region, and its overall score is below the regional average but above the world average.
The Slovakian economy remained in the ranks of the moderately free this year, but its score has declined. Reversing course toward greater economic freedom would require significant reform of the judicial system as well as reining in spending and removing rigidities in the labor market. Given its anticorruption mandate, hopes are high that the new administration will strengthen the integrity of the government.
IMPACT OF COVID-19: As of December 1, 2020, 868 deaths had been attributed to the pandemic in Slovakia, and the economy was forecast to contract by 7.1 percent for the year.
Background
After it gained independence from the former Czechoslovakia in 1993, market reforms made Slovakia one of Europe’s rising economic stars. It entered the European Union and NATO in 2004 and the eurozone in 2009. Since the February 2020 elections, Prime Minister Igor Matovic of the anticorruption Ordinary People and Independent Personalities Party has led a four-party center-right coalition. The murder of a journalist who was investigating tax fraud by the nation’s elite led to massive anticorruption protests and the 2018 resignation of longtime Prime Minister Robert Fico, whose center-left Smer party had long dominated Slovakian politics. Slovakia’s first female president, independent Zuzana Caputová, was elected in May 2019. The country’s small, open economy is driven mainly by exports of automobiles and electronics.
The legal framework recognizes and enforces property and contractual rights. National cadaster data indicate that less than 10 percent of land has clear title. The judiciary is constitutionally independent, but judges are vulnerable to political pressure, corruption, and intimidation. Legal decisions can take years. Corruption remains a problem throughout the bloated and nontransparent bureaucracy, especially in public procurement.
The top individual income tax rate is 25 percent, and the top corporate tax rate is 21 percent. Other taxes include value-added and property taxes. The overall tax burden equals 33.1 percent of total domestic income. Government spending has amounted to 42.0 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.1 percent of GDP. Public debt is equivalent to 48.2 percent of GDP.
Slovakia has abolished the requirement that information on tax arrears be obtained and submitted when starting a business. Wage premiums for work performed during days of weekly rest and at night, however, have been increased. Automobile and electronics exports account for more than 80 percent of GDP. The government’s 2020 budget included subsidies equal to about 1.2 percent of GDP.
As a member of the EU, Slovakia has 45 preferential trade agreements in force. The trade-weighted average tariff rate (common among EU members) is 3 percent, with 639 EU-mandated nontariff measures in force. Slovakia has an additional 44 country-specific nontariff barriers. Openness to foreign investment has aided Slovakia’s transition to a more market-based system. About 90 percent of adult Slovaks have a formal bank account.