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SLOVAKIA


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 23,700 20,500 19,700 61
         
GNI per capita
 US $ 3,950 3,760 3,800 80
Ranking is given out of 208 nations - (data from the World Bank)

Books on Slovakia

REPUBLICAN REFERENCE

Area (sq.km) 
48,845

Population
5,430,033 

Capital 
Bratislava 

Currency 
Koruna 

President 
Ivan Gasparovic

Private sector 
% of GDP
60%

  

Update No: 092 - (01/01/05)

The Slovak phenomenon
Bertrand Russell, the well-known British philosopher and mathematician, was an intrepid opponent of the First World War. He was said to have been astonished at its occurrence because everything seemed to depend on who was a Slovak and who was a Slovene and personally he could never tell the difference.
There was a certain legerdemain here because such an educated man knew his geography enough to know the differentia specifica all right. He was exhibiting a certain disdain for small countries characteristic of big ones, and a mighty disdain for the minutia that lead to wars.
Actually there is an interesting parallel to draw between Slovakia and Slovenia. Slovakia broke away from Czechoslovakia in 1993, largely for the trivial reason that Vladimir Meciar, its dictatorial leader, wished to be independent of Prague. It might have seemed to be a retrograde step. But it has paid off handsomely. Slovakia is on track to emulate Slovenia as a highly successful post-communist country.
This is mainly because Meciar has had a worthy successor in Mikula Dzurinda, an outstanding figure in the post-communist firmament. As premier, he has been relentless in pursuing reform before immediate popularity. He, nevertheless, won the key election last year, pushing Meciar into the wilderness.

FDI to the fore
His key strategy has been to make the Slovak economy as attractive as possible to foreign investors. There's no way of calculating how much investment Slovakia .has siphoned from its neighbours in the past year. Yet data shows Slovakia's Foreign Direct Investment (FDI) growth - 222 per cent this year, according to figures from ING Bank - is much higher than that of neighbours Hungary, Poland and the Czech Republic. Czech FDI growth, in second place, is expected to double, according to ING Bank.
Economists credit a series of reforms, especially tax reform, with turning Slovakia, dubbed a black hole by one U.S. diplomat in the 1990s, into one of the most business-friendly economies in Europe.
The World Bank named Slovakia its 2004 reformer of the year. The OECD called Slovakia the best reformer in Central and Eastern Europe. And Ford Motor Company announced Dec. 2 that it would build a 300 million euro (9.3 billion Kc/US$399 million) factory in the country's underdeveloped east.
"It used to be that any investment in Slovakia was front-page news," said Anton Marcincin, economist at the World Bank's Bratislava office. "Now Slovaks are used to new companies opening factories practically every day. It's amazing."
Slovakia's economy is expected to grow by five per cent over the next two years, according to the OECD. Other analysts say growth on that scale looks sustainable well into the next decade. 

What is a flat tax?
Flat tax replaces sliding tax scales with one fixed rate. In Slovakia, that means income tax for the poor, formerly 10 per cent, and the rich, formerly 38 per cent, are now both 19 per cent. Taxes on goods and services, known as value-added tax (VAT), formerly 20 and 14 per cent respectively, are now 19 per cent. Corporate tax was reduced from 25-19 per cent.
Because taxes are mostly lower, entrepreneurs have less incentive to hide income and profits, which means tax evasion decreases, economists say. At the same time, investment increases and the economy grows. Both effects widen the tax base and make up for some money lost from reduced rates on the highest brackets.
So far, both effects are evident in Slovakia. The number of new firms registering in Slovakia is up by 12 per cent. And the government has collected 10 per cent more income tax than it expected this year.
On the downside, some middle class workers now pay higher taxes, and increased VAT, and construction has driven inflation to 7.8 per cent.
Zdenka Kamiacova, 58, who lives in Bratislava, said flat tax reform hasn't helped her. "On Jan. 1, I lost 800 Sk [630 Kc/US$27] from a pay check of 6,300 [Sk]," she said. "And the prices of everything have gone up. I don't have money to do anything but sit at home and watch TV."
The government and economists argue the long-term benefits outweigh short-term pain to workers such as Kamiacova.
"Many people who lost a few hundred crowns in taxes will see their wages go up as the economy grows," the World Bank's Marcincin said. "But there's a bigger question here. Every generation has to ask itself, what do we do for our children? If we were talking about planting trees, everyone would be for it. Of course it's different with taxes, but there's no question tax reform is a big plus for Slovakia's future."

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AUTOMOBILES

VW Slovakia ups Q3 sales

Volkswagen Slovakia (VW Slovakia), a unit of German carmaker Volkswagen, posted sales of 134bn Slovak crowns in the first three quarters of 2004, an increase of 3 per cent year-on-year, the firm's board Chairman, Jozef Uhrik, said, the CTK News Agency reported.
The firm did not release profit figures for the third quarter. VW Slovakia turned out 170,436 cars in the first nine months of this year, down from 202,754 units in the first nine months of 2003. The drop was due to a change in the structure of the firm's production programme, according to Uhrik.

Slovakia reportedly close to deal with US car maker Ford

Slovakia is reportedly near a deal with the US carmaker, Ford, which is considering building a plant in eastern Slovakia. The deal, worth up to 400m euros or 16bn Slovak korunas, would be another major car investment in Slovakia in the past few years, TA3 TV, Bratislava, reported.
Economy Minister, Pavol Rusko, has refused to comment on the news that the carmaker is heading for Slovakia. He admitted, however, that the ministry had entered into talks with Ford representatives. 
The deal has so far not been confirmed by the Sario agency or Ford's German branch.

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AVIATION

SA transports 160,000 passengers

Airline company Slovenske Aerolinie (SA) transported 160,000 passengers in the first nine months of 2004, about 40,000 less than in the same period of 2003, SITA reported recently.
"This decline was caused by the airline company using less aircraft. While in 2003 Slovenske Aerolinie flew four aeroplanes, in 2004 it only used two Boeing 737-300s," airline spokesman, Marke Revilak, said. During the reported period the airline made 620 flights.

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CREDIT RATINGS

Fitch Ratings upgrade Slovakia-based Dexia Bank Slovensko

Fitch Ratings, the international rating agency, upgraded recently the Slovakia-based Dexia Bank Slovensko's (DBS) long-term rating to A+ from A. The bank's other ratings are affirmed at short-term F1, individual C/D and support 1. The outlook is stable, New Europe has reported.
The upgrade reflects DBS' growing integration with, and support from Dexia (rated long-term AA+). In addition to assistance with its core municipal finance business, DBS has been able to draw on management expertise from Dexia group banks in developing its retail franchise, resulting in a growing, albeit still small, share of the retail deposit market. The individual rating reflects DBS' leading position in the Slovak municipal banking market and good profitability given its low risk profile. 

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INFORMATION TECHNOLOGY

ComArch opens Bratislava centre

Polish software house and systems integrator ComArch opened a development centre in Bratislava, SITA reported recently.
Michal Hudoba, representative of ComArch sro Bratislava announced that ComArch would offer solutions for the trade industry and services, financial and banking sector, and to telecommunication companies and public administration in its new branch in Bratislava. Founder and company Director General, Janusz Filipiak, sees in the opening of the centre in Bratislava a further step towards international expansion for ComArch. He added that computer programmers in the Bratislava branch will be involved in the company's IT projects for clients in Poland, Slovakia, western Europe and the United States. ComArch is one of the biggest Polish IT companies.

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MINERALS & METALS

Slovalco boosts 9-mo profit

Slovalco, the largest Slovak aluminium producer, made a 1.17bn Slovak crown profit in the first nine months of 2004, up by about 121bn crowns, the company said, Interfax News Agency reported.
The improvement was due largely to increased output, thanks to expansion undertaken last year, the company said. Slovalco produced 137,000 tonnes of aluminium, up by almost 22,000 tonnes year-on-year. The growth was also thanks to higher aluminium prices on the London Metal Exchange. Sales added 1.04bn crowns to 8.38bn crowns in the third quarter. Export revenues amounted to 7.07bn crowns and accounted for almost 85 per cent of all sales. The company reported an increase in exports to Poland, the Czech Republic and Hungary at the expense of those to Italy, Germany and France.

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