Economy of Slovakia

The economy of Slovakia is significantly influenced by its accession to the European Union in 2004 and its adoption of the euro currency in 2009. Bratislava, the capital, serves as the country's largest financial center. As of Q1 2018, Slovakia reported an unemployment rate of 5.72%.<br>In economic terms, Slovakia experienced a notable rise in real incomes between 1970 and 1985, increasing by approximately 50%. However, incomes declined throughout the 1990s, with the gross domestic product only recovering to its 1989 level by 2007.<br>The Slovak economy exhibited robust growth from 2000 to 2008, with GDP expanding notably, such as achieving a 10.4% growth rate in 2007.

Top Sectors in Slovakia

Services in Slovakia

Slovak service sector grew rapidly during the last 10 years and now employs about 69% of the population and contributes with over 61% to GDP. Slovakia's tourism has been rising in recent years, income has doubled from US$640 million in 2001 to US$1.2 billion in 2005.

Industry in Slovakia

Slovakia became industrialized mostly in the second half of the 20th century. Heavy industry was built for strategic reasons because Slovakia was less exposed to the military threat than the western parts of Czechoslovakia. After the end of the Cold War, the importance of industry, and especially of heavy industry, declined. In 2010, industry accounted for 35.6% of GDP, compared with 49% in 1990. Nowadays, building on a long-standing tradition and a highly skilled labor force, main industries with potential of growth are following sectors: Automotive, Electronics, Mechanical engineering, Chemical engineering, Information technology.

Agriculture in Slovakia

In 2016, agriculture accounted for 3.6% of and occupied about 3.9% of the labor force. Over 40% of the land in Slovakia is cultivated. The southern part of Slovakia is known for its rich farmland. Growing wheat, rye, corn, potatoes, sugar beets, grains, fruits and sunflowers Vineyards are concentrated in Little Carpathians, Tokaj, and other southern regions. The breeding of livestock, including pigs, cattle, sheep, and poultry is also important.

Information technology in Slovakia

In recent years, service and high-tech-oriented businesses have prospered in Slovakia. Many global companies, including IBM, Dell, Lenovo, AT&T, SAP, Amazon, Johnson Controls, Swiss Re and Accenture, have built outsourcing and service centres in Bratislava and KoÅ¡ice. Slovak IT companies, including ESET, Sygic and Pixel Federation have headquarters in Bratislava.

Slovakia - Key Economic Indicators

Exports and Imports

Slovakia's economy heavily relies on exports, which primarily include vehicles, machinery, electrical equipment, and metals. In recent years, Slovakia has diversified its export base to include automotive components, chemicals, and electronics. Major export destinations include Germany, Czech Republic, France, and Poland. Imports consist mainly of machinery, vehicles, fuels, and chemicals. Slovakia's total exports amounted to approximately €76.5 billion in 2020, while imports totaled around €72.6 billion.

Infrastructure

Slovakia has invested significantly in its infrastructure, particularly in roads, highways, and rail networks. The country benefits from a well-developed transportation system that facilitates domestic and international trade. Major projects include the construction and maintenance of highways connecting key cities and regions, enhancing connectivity and economic efficiency.

Balance of Trade

Slovakia generally maintains a trade surplus, given its strong export performance in manufacturing and industrial goods. In recent years, the trade surplus has fluctuated depending on global demand and economic conditions. The surplus contributes positively to Slovakia's current account balance and overall economic stability.

Fiscal Policy

Slovakia's fiscal policy aims to maintain fiscal discipline while supporting economic growth and social welfare. Government spending focuses on infrastructure development, education, healthcare, and social security. The country has implemented various tax reforms to improve competitiveness, including a flat tax rate of 15% on personal income and corporate profits.

Monetary Policy

The National Bank of Slovakia oversees monetary policy to ensure price stability and support economic growth. The NBS uses tools such as interest rates and foreign exchange interventions to manage inflation and maintain the stability of the euro, which Slovakia adopted in 2009. The central bank's actions are crucial in maintaining confidence in the financial system and promoting investment.

Trade Agreements

Slovakia benefits from trade agreements within the European Union (EU) as a member state and through agreements with countries in the European Free Trade Association (EFTA) and other bilateral agreements. These agreements provide preferential access to markets and facilitate trade in goods and services, enhancing Slovakia's economic integration and competitiveness globally.

Environmental Regulations

Slovakia has implemented stringent environmental regulations to protect natural resources and reduce pollution. Policies focus on renewable energy development, waste management, and biodiversity conservation. The government works closely with EU institutions to meet environmental standards and commitments, promoting sustainable development practices across industries.

Tax System in Slovakia

Capital gains tax: Slovakia imposes a flat rate capital gains tax of 0% for individuals. However, corporate entities are subject to corporate income tax on gains from the sale of assets.
Corporate tax rate: The corporate tax rate in Slovakia is 21%. This tax applies to the profits earned by businesses operating within the country, including both resident and non-resident entities. Certain incentives and deductions may apply to reduce the effective tax rate for specific activities or investments.
Sales tax: Slovakia applies a Value Added Tax system, with a standard rate of 20%. Certain goods and services may qualify for reduced VAT rates of 10% or be exempt from VAT altogether, depending on government policies and regulations.
Property tax: Slovakia levies property tax on real estate owners based on the market value of the property. The tax rates vary depending on the location and type of property, with local municipalities responsible for assessment and collection.
Payroll tax: Employers and employees in Slovakia contribute to social security funds through payroll taxes. These funds finance various social security benefits, including pensions, healthcare, and unemployment benefits. The rates are set annually and vary based on income thresholds.
Tax deductions and credits: Slovakia offers various tax deductions and incentives to promote economic activities and investment. These include deductions for research and development expenses, incentives for investments in certain regions or industries, and credits for employing disabled individuals or contributing to pension funds.
Tax compliance: Tax compliance in Slovakia is managed by the Financial Administration of the Slovak Republic (FSR), which oversees the administration and collection of taxes. The FSR has implemented measures to improve efficiency and transparency in tax collection, including electronic filing systems and taxpayer education programs.
Tax burden: The overall tax burden in Slovakia is moderate compared to many European countries. Taxes on income, profits, consumption, and property contribute to government revenue while supporting public services, infrastructure development, and social welfare programs.

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