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Economy of Slovakia

With the establishment of the Slovak Republic in January 1993, Slovakia continued the difficult transformation from a centrally-planned to a modern market-oriented economy. This reform slowed in the 1994-98 period due to the crony capitalism and irresponsible fiscal policies of Prime Minister Vladimir Meciar's government. While economic growth and other fundamentals improved steadily during Meciar's term, public and private debt and trade deficits soared, and privatization, often tarnished by corrupt insider deals, progressed only in fits and starts. Real annual GDP growth peaked at 6.5% in 1995 but declined to 1.3% in 1999. Much of the growth in the Meciar era, however, was attributable to high government spending and over-borrowing rather than productive economic activity.

The pace of economic reforms picked up during the second administration of Prime Minister Mikulas Dzurinda, which oversaw the simplification of the tax system, reforms of the labor code and pension systems, and a large number of privatizations. With the onset of the global recession in 2008, Slovakia’s highly export-dependent economy began to contract, finishing that year with 6.4% growth, following 10.4% growth in 2007. The economy slowed rapidly in the first quarter of 2009--contracting 12% from the previous quarter--as the deepening recession was exacerbated by a political crisis between Russia and Ukraine that led to a 3-week disruption of Slovakia’s natural gas supply. A return to modest growth was forecast for 2010.

Slovakia entered into the European Exchange Rate Mechanism in November 2005, and joined the European Monetary Union on January 1, 2009. Headline consumer price inflation dropped from a high of 26% in 1993 to 1.4% in 2009. The current account deficit, including the cost of the second pension pillar, reached 5.0% in 2008 then moved considerably higher. The general government deficit for 2010 was forecast at 5.5%, although private sector analysts expected it to be as high as 7.0%. Government debt was estimated at 37.1% of GDP at the end of 2009.

Foreign direct investment (FDI) in Slovakia accounted for much of the growth in the period 2000-2008. Cheap and skilled labor, low taxes, a 19% flat tax for corporations and individuals, no dividend taxes, a relatively liberal labor code, and a favorable geographical location are Slovakia's main advantages for foreign investors. The main points of economic reform remained untouched even after the 2006 elections. FDI inflow cumulatively reached $39.4 billion in 2008; the total inflow of FDI in 2008 was $1.39 billion.

Germany is Slovakia's largest trading partner, purchasing 20.1% of Slovakia's exports and supplying 16.8% of its imports in 2009. Other major partners include the Czech Republic (12.9% of Slovakia’s exports and 12.3% of Slovakia’s imports), Italy (6.1% and 3.7%), Russia (3.8% and 9.0%), Austria (5.8% and 2.9%), Hungary (6.3% and 5.3%), Poland (7.2% and 3.9%) and France (7.8% and 4.0%). Slovakia imports nearly all of its oil and gas from Russia and its export markets are primarily OECD and EU countries. More than 85.1% of its trade in 2008 was with EU members and with OECD countries (86.2%). Slovakia's exports to the United States made up 1.7% of its overall exports in 2008 ($1.21 billion), while imports from the U.S. accounted for 1.2% of its total purchases abroad ($847.24 million).

GDP (2010 est.): $88.4 billion.
GDP growth rate (2010): 4.0%.
Nominal GDP per capita (2010): $16,288 (ING Bank).
Unemployment (2010): 13.5%.
Consumer price inflation (2010): 1% (Ministry of Finance).
Public deficit (2009): 7.9% GDP (final).
Natural resources: Antimony, mercury, iron, copper, lead, zinc, magnesite, limestone, lignite, uranium (not yet in production).
Agriculture: Products--grains, potatoes, poultry, cattle, hogs, sugar, beets, hops, fruit, forest products.
Industry: Types--iron and steel, chemicals, electro-chemical, automobiles, light industry, food processing, back-office support, engineering, building materials.
Trade (2009 est.): Exports--$55.4 billion: machinery and energy equipment, electrical equipment, audio/video equipment, vehicles, base metals, mineral products, plastics and rubber, iron and steel, machinery and energy equipment, plastics. Export partners (2009)--Germany 20.1%, Czech Republic 12.9%, France 7.8%, Poland 7.2%, Hungary 6.3%, Italy 6.1%, Austria 5.8%. Imports (2009 est.)--$53.7 billion: machinery, vehicles, electrical equipment, mineral fuels and oils, audio/video equipment, base metals. Import partners (2009)--Germany 16.8%, Czech Republic 12.3%, Russian Federation 9.0%, South Korea 6.8%, China 5.8%, Hungary 5.3%. (Source: Statistical office of the Slovak Republic).
Foreign investment (2008, National Bank of Slovakia data): Cumulative--$39.4 billion; FDI inflow $1.39 billion in 2008. Sources of direct foreign investment**--Czech Republic 54.2%, Cyprus 20.4%, Poland 4.5%, Austria 4%, France 3.5%, South Korea 3.1%, Germany 3%, Italy 2.6%. Sectors of direct foreign investment--machinery, industrial production, electrochemical, automotive, financial services, information technology (IT), wholesale and retail trade, transportation and telecommunications.

*Figures are based on immediate city's (not region) permanent resident population.
**Government of Slovakia official statistic. A 2008 U.S. Embassy survey found that, taking into account investments of U.S. subsidiaries in Europe, U.S. investment is more than 15% of the total.

Geography of Slovakia

Location: Central Europe. Geographic coordinates: 48 40 N, 19 30 E Area: Total 48,845 sq km (land: 48,800 sq km and water: 45 sq km) Land boundaries: On the north by Poland (444 km), on the east by Ukraine (90 km), on the south by Hungary (515 km), on the southwest by Austria (91 km), and on the northwest by the Czech Republic (215 km). Climate: Temperate summers, cold, cloudy, humid winters Terrain: Rugged mountains in the central and northern part and lowlands in the south Natural resources: Brown coal and lignite, small amounts of iron ore, copper and manganese ore, salt, arable land Land use: Arable land (31%), permanent crops (3%), permanent pastures (17%), forests and woodland (41%), other (8%)

Government of Slovakia

GOVERNMENT AND POLITICAL CONDITIONS
Slovakia's highest legislative body is the 150-seat unicameral National Council of the Slovak Republic. Delegates are elected for 4-year terms on the basis of proportional representation. The Slovak political scene supports a wide spectrum of political parties, including several center-right parties and the Slovak National Party.

In January 1999, Parliament passed a constitutional amendment allowing for direct election of the president. Kosice Mayor Rudolf Schuster was elected president in a May 1999 run-off with former Prime Minister Meciar and took office on June 15, 1999. On April 17, 2004, Ivan Gasparovic, a former Meciar deputy, was elected president; he was re-elected to a second 5-year term on April 4, 2009. Virtually all executive powers of government belong to the prime minister, but the president serves as commander-in-chief of the armed forces, is empowered to grant pardons, and has the right to return legislation to Parliament. Parliament, however, can override this veto with a simple majority.

The country's highest appellate forum is the Supreme Court; below that are regional, district, and military courts. In certain cases the law provides for decisions of tribunals of judges to be attended by lay judges from the citizenry. Slovakia also has a special Constitutional Court, which rules on constitutional issues. The 13 members of this court are appointed by the president from a slate of candidates nominated by Parliament.

In 2002, Parliament passed legislation that created a Judicial Council. This 18-member council, composed of judges, law professors, and other legal experts, is responsible for the nomination of judges. All judges, except those of the Constitutional Court, are appointed by the president from a list proposed by the Judicial Council. The Council determines principles for the selection, evaluation, promotion, and continuing education of judges, and should establish principles of judicial ethics. The Judicial Council appoints Disciplinary Senates in cases of judicial misconduct.

Principal Government Officials
President--Ivan Gasparovic
Prime Minister--Iveta Radicova
Minister of Foreign Affairs--Mikulas Dzurinda
Ambassador to the United States--Peter Burian
Ambassador to the United Nations--Milos Koterec
Ambassador to NATO--Frantisek Kasicky
Ambassador to the European Union--Ivan Korcok

The Slovak Republic has an embassy in the United States, located at 3523 International Court, NW, Washington, DC, 20008.

Slovakia maintains a permanent mission to the United Nations in New York and consulates general in New York (since September 2003) and in Los Angeles (since April 2005). Slovakia has 11 honorary consulates; in Chicago, Cleveland, Denver, Detroit, Denver, Kansas City, Indianapolis, Miami, Minneapolis, Pittsburgh, and San Francisco.

Type: Parliamentary democracy.
Independence: The Slovak Republic was established January 1, 1993 (former Czechoslovak Republic established 1918).
Constitution: Signed September 3, 1992.
Branches: Executive--president (head of state), prime minister (head of government), cabinet. Legislative--National Council of the Slovak Republic (150 seats). Judicial--Supreme Court, Constitutional Court.
Political parties: Distribution of the 150 parliamentary seats is Direction-Social Democracy (Smer-SD) 50 seats; Slovak Democratic and Christian Union (SDKU) 28 seats; Slovak National Party (SNS) 19 seats; Hungarian Coalition Party (SMK) 15 seats; People’s Party - Movement for a Democratic Slovakia (LS-HzDS) 15 seats; Christian-Democratic Movement (KDH) 9 seats; Bridge (Most-Hid) 5 seats; Slovak Conservative Democrats (KDS) 4 seats; unaffiliated 5 seats. Other parties include Alliance of New Citizens (Ano); Communist Party of Slovakia (KSS); Freedom Forum (SF); Movement for Democracy (HzD).
Suffrage: Universal at 18 years.
Administrative divisions: Eight administrative regions, 79 districts.

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History of Slovakia

Slovak history can find its roots in the Great Moravian Empire, founded in the early ninth century. The territory of Great Moravia included all of present western and central Slovakia, the Czech Republic, and parts of neighboring Poland, Hungary, and Germany. Saint Cyril and Methodius, known for the creation of a Cyrillic alphabet, came to Great Moravia in the early tenth century as missionaries to spread Christianity upon the invitation of the king. The empire collapsed after only eighty years as a result of the political intrigues and external pressures from invading forces. Slovaks then became part of the Hungarian Kingdom, where they remained for the next 1,000 years. Bratislava became the Hungarian capital for nearly two and a half centuries when the Turks overran Hungary in the early 16th century. Revolutions inspired by nationalism swept through Central Europe in 1848, which led to the codification of the Slovak language by Ludovit Stur in 1846 and later the formation of the dual Austro-Hungarian monarchy in 1867. As language and education policies favoring the use of Hungarian, which came to be known as Magyarization, grew stricter, Slovak nationalism grew stronger. Slovak intellectuals cultivated closer cultural ties with the Czechs, who were themselves ruled by the Austrians. After the dissolution of the Austro-Hungarian State after WWI, the concept of a single Czecho-Slovakian unified state came to fruition. Tomas Masaryk signed the Pittsburgh Agreement, declaring the intent of the Czech and Slovaks to found a new state in May 1918, and a year later become Czechoslovakia's first president. After the 1938 Munich agreement that forced Czechoslovakia to cede territory to Germany, Slovakia declared its autonomy. Slovakia became a Nazi puppet state led by the Catholic priest Jozef Tiso. During this period, approximately 70,000 Slovak Jews were sent to concentration camps to perish in the Holocaust. Roma, while persecuted under the Tiso regime, were not deported by the Slovak Hlinka guards. An undetermined number of Roma were deported from the southern part of Slovakia when it was occupied by Hungary in 1944. The Slovak National Uprising, a resistance movement against the fascist Slovak state, occurred in 1944 with the participation of Slovaks, Russians, Jews, and some allied forces but was put down by Nazi forces. At the conclusion of WWII, the reunified Czechoslovakia was considered within the sphere of influence of the Soviet Union. The communist party, supported by the U.S.S.R., took over political power in February 1948 and began to centralize power. The next four decades were characterized by strict communist rule, interrupted only briefly during the Prague Spring of 1968. The Slovak born Communist leader Alexander Dubcek presided over a thawing of communist power and proposed political, social, and economic reforms in his effort to make "socialism with a human face" a reality. Concern among other Warsaw Pact governments that Dubcek had gone too far prompted an invasion and Dubcek's removal from his position. The 1970s were characterized by the development of a dissident movement. On January 1, 1977 more than 250 human rights activists signed a manifesto called Charter 77, which criticized the government for failing to meet its human rights obligation. The so-called "Candle Demonstration," which took place in Bratislava in March 1988, was the first mass demonstration of the 1980s against the communist regime in Czechoslovakia. The Demonstration, organized by Roman Catholic groups asking for religious freedom in Czechoslovakia, was brutally suppressed by the police. On November 17, 1989, a series of public protests, known as the "Velvet Revolution," began and led to the downfall of communist rule in Czechoslovakia. Dissident groups, such as Charter 77 in the Czech Republic and Public Against Violence in Slovakia, united to form a transitional government and assist with the first democratic elections since 1948. Several new parties emerged to fill the political spectrum. After the 1992 elections, Vladimir Meciar's Movement for a Democratic Slovakia (HZDS), based on its appeal on fairness to Slovak demands for autonomy, emerged as the leading party in Slovakia. In June 1992, the Slovak parliament voted to declare sovereignty and the federation dissolved peacefully on January 1, 1993. Meciar's party--the Movement for a Democratic Slovakia (HZDS)-- ruled Slovakia the first 5 years as an independent state. His authoritarian style as Prime Minister created international concerns about the democratic development of Slovakia. In the 1998 elections, Movement for a Democratic Slovakia (HZDS) received about 27% of the vote, but went into the opposition, unable to find coalition partners. A reform-oriented coalition formed a government led by Mikulas Dzurinda, the chairman of the Slovak Democratic and Christian Union (SDKU). The first Dzurinda government made political and economic reforms that enabled Slovakia to enter the Organization for Economic Cooperation and Development (OECD), close virtually all chapters in European Union (EU) negotiations, and make the country a strong candidate for North Atlantic Treaty Organization (NATO) accession. However, the popularity of the governing parties declined sharply, and several new parties gained relatively high levels of support in public opinion polls. In the September 2002 parliamentary election, a last-minute surge in support for the Slovak Democratic and Christian Union (SDKU) gave Dzurinda a mandate for a second term. He formed a government with three other center-right parties: the Hungarian Coalition Party (SMK), Christian Democrats (KDH), and Alliance of New Citizens (ANO). The main priorities of the coalition were ensuring a strong Slovak performance within NATO and the EU, fighting corruption, attracting foreign investment, and reforming social services, such as the health care system. Following a summer 2003 parliamentary shake-up, the government lost its narrow parliamentary majority and controlled only 69 of the 150 seats; however, the coalition was relatively stable because of the parties' similar political philosophies and conflicts between opposition parties. Slovakia officially became a member of NATO on March 29, 2004 and joined the EU on May 1, 2004. The government strongly supported Slovakia's NATO and EU accession and continued the democratic and free market-oriented reforms begun by the first Dzurinda government. Parliamentary elections were held June 17, 2006. Robert Fico became Prime Minister, leading a coalition of SMER (Direction), the Slovak National Party (SNS), and the Movement for a Democratic Slovakia (HZDS).

People of Slovakia

The majority of the 5.4 million inhabitants of the Slovak Republic are Slovak (85.8%). Hungarians are officially the largest ethnic minority (9.7%) and are concentrated in the southern and eastern regions of Slovakia. Up to 10% of the population is thought to be Roma, although the last official census (2001) put their number at 1.7%. Other ethnic groups include Czechs, Ruthenians, Ukrainians, Germans, and Poles. The Slovak constitution guarantees freedom of religion. The majority of Slovak citizens (69%) are Roman Catholic; the second-largest group is Protestants (9%). About 3,000 Jews remain of the estimated pre-World War II population of 120,000. The official state language is Slovak, and Hungarian is widely spoken in the south. Despite its modern European economy and society, Slovakia has a significant rural element. About 45% of Slovaks live in villages of less than 5,000 people, and 14% in villages of less than 1,000. Nationality: Noun and adjective --Slovak(s). Population (May 2001 census*): 5,379,455. Annual population growth rate (2001 est.): 0.13%. Ethnic groups (2001): Slovaks 85.8%, Hungarians 9.7%, Roma 1.7%, Czechs 0.8%, Ruthenians 0.4%, Ukrainians 0.2%, other 1.4%. Unofficial estimates place the Roma population between 6%-10%. Religions (2001): Roman Catholic 69%, Protestant 9%, Greek Catholic 4%, Orthodox 0.9%, other 0.6%, unknown 3.5%, 13% report no affiliation. Languages: Slovak (official), Hungarian, Ruthenian, Romany, and Ukrainian. Education: Literacy --99%. Health: Life expectancy (2001)--78 yrs. females; 70 yrs. males. Work force (2.1 million in 2001): Industry, construction, commerce --61%; financial, commercial, health services --18%; government and education --15%; agriculture --6%.