Slovakia - Economic development



The government in the early 1990s slowed economic reforms due to the social burden imposed by the transformation to a market economy. Measures included stimulation of demand through price subsidies and public spending. Slovakia's most successful structural reform has been privatization. The first stage of large-scale privatization included 751 companies, and a second stage, which involved 650 medium-and large-scale enterprises, was implemented in late 1993.

However, the Meciar government was slow to implement the $1.5 billion privatization program after he regained power in 1994 and the country continued to rely heavily on foreign aid. Western investors cheered his defeat and replacement by reformer Mikulas Dzurinda in 1998. The Dzurinda government quickly earned praise for its implementation of reforms. The renewed liberalization measures, combined with a new attitude toward Slovakia's Roma (Gypsy) population caused the EU to place Slovakia back on its list of candidate members. In December 2002, Slovakia was officially invited to join the EU, with accession planned for May 2004.

Slovakia's foreign debt at the beginning of 2002 was about $11 billion, approximately 55% of gross domestic product (GDP). The current account deficit was high, largely due to a shortfall in foreign trade. Foreign direct investment (FDI) has been relatively small in recent years, although FDI in 2000 alone was greater than cumulative investment received by Slovakia in the preceding 10 years. Although growth was strong and inflation relatively low in the early 2000s, the unemployment rate remained high. By 2002, the main banks and utilities had been privatized; but further corporate restructuring and labor market reform, improved banking supervision, and strengthening state administration and the judicial system remained structural reforms to be implemented.

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