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- GDP (PPP):
- $152.6 billion
- 2.4% growth
- 2.6% 5-year compound annual growth
- $28,175 per capita
- Inflation (CPI):
- FDI Inflow:
A prudent regulatory framework for the financial sector combined with competitive tax rates has fueled Slovakia’s transition into a flexible and vibrant market-based economy with considerable resilience. Openness to foreign trade and investment has positioned the country as one of the most attractive destinations for foreign direct investment in Europe. Well-established property rights and monetary stability also have contributed to Slovakia’s economic vigor.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 66.6 (down 0.6 point)
- Economic Freedom Status: Moderately Free
- Global Ranking: 56th
- Regional Ranking: 25th in Europe
- Notable Successes: Open Markets and Monetary Freedom
- Concerns: Corruption, Management of Public Finance, and Labor Freedom
- Overall Score Change Since 2012: –0.4
Regaining fiscal discipline in light of recent deficits poses a significant challenge. The judicial system remains susceptible to political influence, and the perceived level of corruption continues to be high.
After Slovakia gained independence in 1993, market reforms made it one of Europe’s rising economic stars, but progress has slowed. The country entered the European Union in 2004 and has been part of the eurozone since 2009. Andrej Kiska was elected president in 2014 and reappointed Prime Minister Robert Fico, who had been serving since 2012. Slovakia hopes to be part of the proposed Eastring pipeline, which will transit across Slovakia, Hungary, and Romania, linking central Europe with southwestern Europe. There are divisions within the government about the role of NATO and the EU with regard to Russia and the appropriate response to the crisis in Ukraine.
Corruption is significant, notably 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 Many state-owned companies do not publish even basic information.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 despite some reforms, the court system 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 is 25 percent, and the top corporate tax rate is 22 percent. Other taxes include a value-added tax and a property tax. The overall tax burden equals 29.6 percent of total domestic income. Government spending has risen and amounts to 41 percent of GDP, and the budget balance remains in deficit. Public debt equals about 55 percent of total domestic output.
The overall regulatory framework has been reformed to facilitate entrepreneurial activity, but the pace of reform has slowed in comparison to other emerging economies. The labor market lacks flexibility, resulting in an unemployment rate of over 10 percent. Fuel prices at the pump fell by 11 percent in 2014, but household gas prices are set by a regulator and did not drop as quickly as they should have.
EU members have a 1 percent average tariff rate. Trade agreements are currently being negotiated with countries that include the United States and Japan. State-owned enterprises operate in the energy and insurance sectors. Foreign and domestic investors receive equal treatment, and full foreign ownership is permitted in most sectors. The financial system has undergone significant liberalization, and banking remains relatively sound.