Economy of Slovakia

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Slovakia's economy increasingly resembles that of a so-called developed country. With the highest sustained GDP growth in the European Union, reporting 10.4% in 2007 and the highest rating from V4 countries[4], the Slovak economy has been considered a tiger economy known as the Tatra Tiger. Slovakia has been an EU member state since 2004 and adopted the euro currency at the beginning of 2009. Its capital, Bratislava, is the largest financial centre in Slovakia. Unemployment has fallen considerably, although long-term unemployment remains stubbornly high. In the long term, improving education outcomes, including by reducing the impact of socioeconomic background on outcomes, will be central to sustaining high economic growth and social cohesion. GDP per capita at purchasing power parity was $22,600 in 2008, which was 70% of the EU average.

Contents

History

Since the establishment of the Slovak Republic in January 1993, Slovakia has undergone a transition from a centrally planned economy to a free market economy, a process which some observers believe was slowed in the 1994-98 period due to the crony capitalism and other fiscal policies of Prime Minister Vladimír Mečiar's government. While economic growth and other fundamentals improved steadily during Mečiar's term, public and private debt and trade deficits also rose, and privatization was uneven. Real annual GDP growth peaked at 6.5% in 1995 but declined to 1.3% in 1999.

Two governments of the "liberal-conservative" Prime Minister Mikuláš Dzurinda (1998–2006) pursued policies of macroeconomic stabilization and market-oriented structural reforms. Nearly the entire economy has now been privatizatized, and foreign investment has picked up. Economic growth exceeded expectations in the early 2000s, despite recession in key export markets. In 2001 policies of macroeconomic stabilization and structural reform led to spiraling unemployment. Unemployment peaked at 19.2% [1] (Eurostat regional indicators) in 2001 and though it has fallen to (depending on the methodology) 9.8%((cn)) or 13.5%[citation needed] as of September 2006, it remains a problem. Solid domestic demand boosted economic growth to 4.1% in 2002. Strong export growth, in turn, pushed economic growth to a still-strong 4.2% in 2003 and 5.4% in 2004, despite a downturn in household consumption. Multiple reasons entailed a GDP growth of 6% in 2005. Headline consumer price inflation dropped from 26% in 1993 to an average rate of 7.5% in 2004, though this was boosted by hikes in subsidized utilities prices ahead of Slovakia’s accession to the European Union. In July 2005, the inflation rate dropped to 2.0% and is projected at less than 3% in 2005 and 2.5% in 2006. In 2006, Slovakia reached the highest economic growth (8.9%) among the members of OECD and the third highest in the EU (just behind Estonia and Latvia). The country has had difficulties addressing regional imbalances in wealth and employment.[5] GDP per capita ranges from 175% of EU average in Bratislava to only 50% in Eastern Slovakia (forecast for 2010).

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