% of GDP
In 1918 the Slovaks joined the closely related Czechs to form Czechoslovakia. Following the chaos of World War II, Czechoslovakia became a communist nation within Soviet-ruled Eastern Europe. Soviet influence collapsed in 1989 and Czechoslovakia once more became free. The Slovaks and the Czechs agreed to separate peacefully on 1 January 1993. Historic, political, and geographic factors have caused Slovakia to experience more difficulty in developing a modern market economy than some of its Central European neighbours.
Update No: 081 - (01/02/04)
The Slovaks have a coalition government in power, which is coping with an economic situation that is showing signs of improvement, the more welcome because the EU economies next door have been so long in the doldrums. Slovakia's economy exceeded expectations in 2001-03, despite the general European slowdown. GDP growth for 2003 came in at 3.9%, while it is expected to be 4% in 2004, the year of Slovakia's accession to the EU.
Unemployment is still the economy's Achilles heel at almost 14% of the work force, admittedly down from 17% in February, while inflation is close to double figures, being 9.6% on an annual basis in October, the latest available figure. But the IMF in a recent evaluation is supportive, noting that growth is strong, macro-economic imbalances are narrowing, unemployment is declining and core inflation is low.
The country's external current account deficit is projected to narrow to 4% of GDP in 2003 and 2004, based on robust export growth as Germany and other EU economies begin to pick up.
Slovakia has mastered much of the difficult transition from a centrally planned economy to a modern market economy. The Dzurinda government has made excellent progress in 2001-03 in macroeconomic stabilisation and structural reform. Major privatisations are nearly complete, the banking sector is almost completely in foreign hands, and foreign investment has picked up.
The government faces other strong challenges in 2004, especially the cutting of budget and current account deficits and the prevention of a revival of inflation.
The IMF in a generally positive recent report notes that, as regards fiscal policy, the 2004 budget is a welcome step towards further fiscal consolidation. This is due to the government adopting an appropriate budget deficit target of 3.9% of GDP for 2004, while implementing an ambitious tax reform.
The IMF, however, states that the government needs to get a better handle on the finances of municipalities and the health sector. It also expressed disappointment at the rise in subsidies in the 2004 budget, all of the increase going to the agricultural sector. But then the IMF does not have to bear responsibility to the electorate.
Generally, the government is putting in a good performance. Premier Mikulas Dzurinda is proving an able operator and is even addressing unpopular issues, such as the Roma or gypsies, whom he visited at Letanovce recently.
He pledged to finance new homes for them in place of their slums, using EU funds for the purpose. He had with him EU Commissioner for Enlargement, Guenter Verheugen, to lend credibility to his pledge.
Slovakia looks back with pride on 2003
Slovakia stayed on top of investors' priority lists in 2003 according to a report compiled and published by the Slovak Spectator recently. But the report also warned that Slovakia in the coming years still needed to finish pension and health care reforms, construct infrastructure, approve measures to make public finance more transparent, and adopt other economic and administrative reforms.
The report said, "the flat 19% income and value added tax adopted this year, together with the country's advantageous geographical location and its educated, relatively cheap labour force, could make Slovakia a favourable place for investments in the manner of southern Asian countries, the so-called tigers. Economic reforms, though sometimes with tough impacts on inhabitants in the form of price hikes and new payments, have begun to bring their initial healing macroeconomic effects."
"Slovakia has experienced a decent economic growth compared to its neighbours and European Union countries, as well as a decreasing public finance deficit. The country was successful in attracting important new investments from companies like PSA Peugeot Citroen," the report added.
Starting from Citroen in January the investment in Slovakia continued unabated with billionaire media magnate Steve Forbes in Forbes magazine saying, "Slovakia a paradise for investors." He listed tax reforms, a flexible labour code, and a surplus of educated and cheap labour as the main reasons for investors to come to Slovakia."
Moreover, Fitch ratings changed its long-term foreign currency ratings from stable to positive in seven out of the 10 EU-acceding states, including Slovakia. Slovakia currently holds a BBB rating.
The report also mentioned about Slovakia joining Poland in the shortlist as investment sites for South Korean carmaker Hyundai, which plans a new car assembly plant in central Europe. The US$1.5bn (1.26bn Euro) investment could flow either to the central Slovak town of Zilina or to Radomsko in Poland. The carmaker is expected to pick the destination for its money in early 2004. Last but not least the report compiled by Marta Durianova highlighted, "In 2004 Slovakia enters the European Union. This will definitely be a test for its international competitiveness and for the success of the already implemented reforms."
Slovakia looks set to continue on its path of climbing the ladder of success and joining the European Union will definitely be a shot in the arm in 2004.
Slovakia wants Hyundai plant
Slovak Economy Minister, Pavol Rusko recently announced that the ministry's objective for this year will be to draw in South Korean automaker, Hyundai, to Slovakia, SME reported.
Hyundai authorities are now examining two sites, Slovakia or Poland, for the company's new central European plant. A decision on the matter is due in the coming weeks.
According to Rusko, the ministry will also focus on the development of industrial parks across Slovakia, with particular attention paid to seven regions.
Slovak Transpetrol participates in Yukos-OMV deal on oil pipeline
The [Austrian] OMV, [Slovak] Transpetrol and [Russian] Yukos within a few months have reached an agreement on building a pipeline linking the Slovak capital of Bratislava with the Austrian capital of Vienna, Radio Slovakia has reported.
A short section of 60 km of the pipeline will link Slovakia directly with the oil system in western Europe.
Transpetrol Director General, Stefan Czucz, said: "Our Austrian partners will thus be able to diversify significantly oil supplies and our strategic investor, the Yukos company, will thus be able to increase Russian oil exports to interesting European markets.
"Because of the state majority share in our company, this will also benefit the entire Slovak economy."
The project, valued at almost 30m euros, is to be completed by 2006.
Slovenske elektrarne draws in heavy foreign interest
Five foreign investors have submitted specified bids for a minority stake in Slovakia's dominant power producer, Slovenske elektrarne (SE), while three firms dropped out of the tender, Slovak Economy Minister, Pavol Rusko, said, Interfax News Agency reported.
The bids will now be assessed by the privatisation advisor, Rusko was quoted as saying, he did not reveal the names of the bidders. Two investors are interested in SE as a whole, including its nuclear power plants.
Three firms are interested only in SE's thermal and hydroelectric operations.
Dominant Czech power utility, CEZ, confirmed recently that it had submitted a bid for the 49% stake in SE.
In addition to CEZ, parties expressing interest in SE to date include Russia's RAO UES, the US's AES, Austria's Verbund, Germany's E.ON, Italy's Enel, Belgium's Electrabel and Britain's International Power.
While the original stake up for sale stood at 49%, Rusko stated the government might increase that to anywhere from 51% to 66%.
The cabinet should decide on the size of the stake in January, Rusko said. The names of those investors that will be allowed to carry out due diligence on SE should be known in the near future. Binding bids will be due in June or July of 2004.
The entire transaction should be completed by the end of 2004 or beginning of 2005 if SE is sold as a whole. If the firm is split in parts, the sale would be delayed up to six months, according to Rusko.
SE produces some 85% of the electricity consumed in Slovakia.
Slovakia approves funding for energy saving programme
The Slovak Economy Ministry recently green-lighted financial backing for 12 of 18 enrolled projects concerning energy saving and use of renewable energy resources in 2003, Sita reported.
"Eight of the approved projects received direct non-returnable financial support and four got assistance to get a loan," Sita quoted Dagmar Hlavata, representative of the economy ministry's department for communication and public relations, as saying in a statement. In total, 18 energy-saving and renewable energy resource projects seeking financial aid were presented to the ministry in mid-June 2003. Six projects were not approved, however. The ministry earmarked 30 million Slovak crowns for the projects last year.
Under the programme, only small and medium-sized enterprises (SME) and business agencies registered in Slovakia can collect state aid. From 2000 to 2002, the ministry granted 62 million crowns within the programme.
The programme is scheduled to end on December 31st, 2006, while the deadline for submitting projects is June 30thy, 2006.
The money given for the support of energy saving and use of renewable energy resources can be either returnable or non-returnable. They also can be subsidies for the alternative production of electricity. The energy programme is the only plan Slovakia has initiated for energy saving. It is linked with commitments of Slovakia ensuring from international agreements to decrease emission of carbon dioxide, according to
Slovakia expects to attract FI of over US$2.5bn in 2004
Slovakia expects to attract foreign investment amounting to over US$2.5bn (83.7bn Slovak crowns) in 2004, or twice as much as in 2003, Slovak Economy Minister, Pavol Rusko, announced recently, Interfax News Agency reported.
Decisions are pending on investments worth over one billion crowns in the auto, electrical engineering, software, chemical and engineering industries, Rusko said. The growing interest in investment in Slovakia is due to the government's approval of a flat income tax, reforms to the pension and health care systems and the decision to sell off majority stakes in state monopolies, Rusko said.
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