An overview of Slovakia:

The reintroduction of an economy based on free enterprise has been a difficult process in Slovakia. Because much of the country’s industrialization took place during the Communist era, many Slovakian industries were inefficient and produced goods that were not competitive in the world market. To modernize these industries and retrain workers has required foreign investment, but this has been slow in coming, due in part to perceived political instability in the country. Compounding the problem of outmoded industry was the Czechoslovak government’s decision in the early 1990s to drastically reduce the country’s defence industry. The production of weapons and other military equipment had been based largely in Slovakia and had employed as much as 10 percent of the Slovak workforce in the 1980s. The reduction led to a decline in overall industrial production and a significant rise in unemployment.

The Slovak economy has improved somewhat in recent years. Between 1993 and 1994, gross domestic product grew by 4.3 percent, inflation fell from more than 20 percent to about 12 percent, and the budget deficit was brought under control. The pace of change remains slow. A fundamental part of the conversion to a market economy is the return of state-controlled enterprises to private ownership which has been marred by a non-transparent privatization process.

Foreign trade is important to Slovakia’s economy. In 1994 imports and exports each totalled more than $6 billion. Crude oil, natural gas, machinery, and transportation equipment are Slovakia’s main imports. Exports include machinery, chemicals, fuels, steel, and weapons. The Czech Republic, Slovakia’s main trading partner, supplies about 30 percent of Slovakia’s imports and purchases approximately 40 percent of its exports. Austria, Germany, and Russia are Slovakia’s other leading trade partners.

The currency of the Slovak Republic is the Koruna (Sk), or crown in English. Click here to see samples of the currency

Slovakia is a member of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank), as well as of the European Bank for Reconstruction and Development (EBRD). In October 1993 the Slovak government signed an association agreement with the European Union (EU), and in 1995 the country applied for EU and OECD membership.

Economic History

Slovakia, which until 1918, was known mostly under the name of "High Hungary" or "the Highlands", but also known under the Turkish name of "To’t vilajet ", is an ancient economic entity. As early as 100 B.C., in Bratislava, coins were struck under the name of "biateque." In Slovakia, the famous Roman inscription engraved on the Rock of Trencín dated 179 A.D. has been conserved and testifies to the long commercial tradition of its regions. For seven centuries, from 1335 to 1918, gold ducats from Kremnica were struck, using local gold, and were always of the same purity and weight.

In the fifteenth century, gold was extracted in Slovakia at the rate of 1000-1500 kilos per year which represented around 40% of the world production plus 10,000 kilos of silver, representing 30% of world production. Slovakia was, at the end of the fifteenth century and the beginning of the sixteenth century, the largest producer of copper in Europe. The mining and the metallurgical industries, were, for a long time, at quite a high level. In 1627, in Banská Štiavnica, gunpowder was used to extract minerals. Three hundred years after the creation of the Istropolitana Academy (founded in 1465 by Mathias Corvin), the first Academy of Mines and Forests in the world was created in Banská Štiavnica and in 1786, the first international association of scientists for the development of mines saw the light of day.

The development of the capitalist market in Hungary and the strong Hungarization which took place in the last decades of the 19th century and the beginning of the 20th century had a negative impact on the Slovak economy which made it lose its independence by integrating itself into the Hungarian economy. For more than 40 years, a disintegration and a brutal destruction of the political, cultural, social and economic life took place in Slovakia. During that period (around 1890), in the Administration of the  "Comitats" and in Education, there were 1035 Slovaks for 7865 Hungarians in Slovakian cities. In the public administration, there were 1147 government workers, of which only 29 were Slovaks.

Emigration was the fate forced on the Slovakians who had to leave Slovakia. In the 1890s, there were four times more Slovakians in Budapest than the total population of Zilina. At that time, Budapest was the biggest Slovakian city. In the period from 1899-1913, 394,713 Slovakians emigrated to the United States. Today, almost two million Americans declare themselves to be of Slovakian origin.

After the creation of Czechoslovakia on October 28, 1918, and after six years of independence of the State of Slovakia (1939-1945), Slovakia, as of January 1, 1993, has begun to write its own economic history.

Early on, Slovakia became aware of the importance of adapting its transportation network to present world needs. At the end of 1996, highways represented only 1% of the road system (198 km.). Thanks to an ambitious project, the Slovakian government vowed to catch up and make Slovakia, in several years, a crossroads between the East and the West:

- Construction of 460 km. of highways by the year 2005 (with the help of the European Investment Bank).

- Electrification of the entire rail system by the year 2010 and construction of a supplementary high-speed rail system between Bratislava and the Vienna Airport and to Poland and the Ukraine.

- Modernization of the airports at Bratislava, Košice, Zilina and Sliac 

-         Extension of the two mobile telephone systems

Labour

The unemployment rate in Slovakia has been 10 percent or higher since the end of Communist rule; in early 1995 unemployment stood at about 15 percent. The service sector, which has developed very quickly since 1989, employs approximately 44 percent of the labour force. About 33 percent works in manufacturing, and about 12 percent is employed in agriculture. Labour unions are not as important as they were during the Communist period. However, sizable numbers of workers and employees continue to belong to unions because of the benefits they provide. The largest union in Slovakia is the Engineering and Metal Union, which was founded in April 1993 to replace the Czechoslovak Trade Union of Metal Workers.

Foreign investors have found that the Slovaks represent a top-quality labour force, efficient and productive. They have had no problem finding skilled engineers and top managers thanks to an outstanding higher education system, which, each year, turns out 75,000 new specialists (1.2% of the population). The standard of education in primary schools is the highest in Central Europe. Slovakia is in fourth place in regards to secondary education, with a 91.7% rate of schooling.

The average monthly salary, taking mandatory payroll deductions into account, does not exceed $400. This represents 23% of the amount of payroll deductions in Vienna which is only an hour away by car from Bratislava.

Agriculture

Although subsistence agriculture traditionally dominated the Slovak economy, this sector declined during the Communist period, when industry was promoted as Slovakia’s principal economic activity. More than one-third of land in Slovakia is cultivated. Wheat, barley, maize, sugar beets, and potatoes are the country’s principal crops. Viticulture (the cultivation of grapes for wine production) is practiced on mountain slopes, and some tobacco is grown in the Váh River valley. The breeding of livestock, including pigs, cattle, sheep, and poultry, is also important.

Mining and Manufacturing

Copper, lead, zinc, manganese, iron, and lignite are Slovakia’s chief mineral products. However, the country’s mining industry has decreased in importance since the end of Communism, as many mines were found to be inefficient and unable to compete in the market economy.

Slovakia became industrialized in the latter half of the 20th century, under the Communist government. The Communists emphasized heavy industry, including the production of machinery and steel. Much of this was produced for military purposes, and Slovakia became the centre of Czechoslovakia’s weapons industry.

Manufacturing is still one of the most important sectors of the Slovak economy. Ceramics, chemical products, machinery, petroleum products, steel, and textiles are among the chief manufactures; the production of processed food, such as beer and sheep’s cheese, is also important. Although the weapons industry declined with the collapse of Communism, it has been revived somewhat since Slovakia gained independence in 1993; military equipment produced in Slovakia is now primarily exported.

Energy

Much of Slovakia’s energy supply is imported, particularly oil and gas. Hydroelectric power from plants located on the Váh, Orava, Slaná, and Hornád rivers provides an important domestic source of energy. There is a nuclear-power station at Jaslovské-Bohunice and another one under construction at Mochovce. In the early 1990s Slovakia had an installed electricity-generating capacity of about 6.3 million kilowatts; annual output was some 20.9 billion kilowatt-hours.

In 1977 the Gabcíkovo-Nagymaros hydroelectric project began as a joint effort between Czechoslovakia and Hungary, with Austria providing technical and financial assistance for the Hungarian part of the project. The plan called for the diversion of the Danube and the construction of two dams on the section of the river that formed the Czechoslovak-Hungarian border. One dam was to be built by Hungary at Nagymaros, and the other was to be constructed at Gabcíkovo in eastern Czechoslovakia (now Slovakia). In 1989 environmental concerns led Hungary to abandon the project; the Czechoslovak government proceeded unilaterally on construction of the Gabcíkovo dam, producing a major dispute between the two governments which is to this day unresolved.

Standard of Living

The Slovak Republic is developing a market economy, which, conforming to its Constitution, has a social and ecological orientation. A comprehensive Social Security system exists and the State aids in the development of infrastructures (power plants, highways). Consumption is increasing. Auto sales reached a high point in 1995, an increase of 80%, with 47,000 vehicles sold. The number of Internet sites was 1.6 per 1,000 inhabitants in January 1997. With 17 telephone lines per 100 inhabitants, Slovakia is behind the Baltic countries and Slovenia, but in front of the other Central and Eastern European countries.

Banking and Currency (The Slovak koruna)

Slovakia’s central bank is the National Bank of Slovakia, founded in 1993 with headquarters in Bratislava. The central bank is responsible for setting monetary policy, issuing currency, and supervising the activities of other banks. More than ten new commercial banks also have been established since 1990. A stock exchange is located in Bratislava.

The Slovak koruna (Sk) was created by a legislative decree on January 1, 1993, but only became a reality on February 8, 1993. The move towards the reduction of currency reserves placed in accounts in the Czech National Bank, which, in January 1993, was larger than that which affected the Slovak National Bank reserves, led the leaders to make a rapid decision which consisted of separating the currencies of the two countries on February 8, 1993. It should be noted that the Czechs had been preparing for this since the Summer of 1992 whereas, in Slovakia, the technical preparations were taking place when this decision was made.

Finally, a sufficient quantity of official stamps was able to be prepared to "stamp" the future Slovakian currency. The Slovakian fiscal stamps (which showed the national emblem and the inscription  "Slovak Republic") were printed in Canada and stamping began January 13, 1993. The Czech fiscal stamps carry neither the national emblem nor the inscription  "Czech Republic ".

This, therefore, is how the Slovakian koruna came into being. However, its evolution, especially during the first half of 1993, was marked by unfavorable forecasts. It is undeniable that the declaration of the ultimate Slovakian Prime Minister of the Federal Government, Marian Calfa, in which he stated "insofar as the currency is not indexed on gold but on the national economic results, the dollar will be exchanged in the Czech Republic for 28 korunas while in the Slovak Republic, it will be exchanged for 84 korunas " did not help matters. This opinion was shared by Mr. Hoffman, Slovakian Vice-President of the Federal Government, Mr. Vojtech, Economic Advisor to the Vice-Prime Minister of the Slovak Government and a certain number of other high-profile personalities. In the case of the partition of Czechoslovakia, the relation between the rate of the Slovak koruna and the Czech koruna should have been 1/3.

The opinions which were expressed regarding the "inevitable failure" of Slovakia were also a negative influence at first on the stability of the currency. Insofar as a certain number of declarations were made that Slovakia alone would go bankrupt in several days, several weeks or several months, local and foreign entrepreneurs and banks adopted an attitude of wariness with Slovakia, an attitude which was visible in the evolution of cash reserves in the Slovakian banking sector during the first few months of 1993. They reached $175.6 million in February 1993.

The inevitable consequence of this evolution was the devaluation by 10% of the Slovakian currency on July 10, 1993 which happened after a meeting of Slovakian authorities and representatives of IMF. However, the Slovakian currency, since its creation, had been following a course which was supposed to lead to its convertibility. After the currencies were separated, the payments between the Czech Republic and the Slovak Republic were made based on the clearing system until October 1, 1995, the date on which the Slovak koruna was declared convertible in keeping with Article VIII of the IMF agreements. On May 28, 1997, for the first time, the rate of the Slovak koruna went higher than that of the Czech koruna.

The Slovak koruna, characterized by its stability, has become the cornerstone of excellent macro-economic results in Slovakia, recognized by international monetary institutions.

Useful web sites

http://www.slovakia.org/

A wide ranging site covering many aspects of modern life in Slovakia

http://www.slovensko.com/

News from Slovakia

http://www.einnews.com/slovakia/newsfeed-SlovakiaEconomy

News feed for the latest news on the country

http://www.nationmaster.com/country/lo/Economy

Detailed information on the economy

http://www.nbs.sk/INDEXA.HTM

National Bank of Slovakia

http://www.test.sopk.sk/an/index.php

Slovakian Chamber of Commerce