A strategic position and wealth that does not benefit everyone
Since joining the European Union in 2004, Slovakia's economic situation has improved significantly. Overall, the figures for its economy are in the green, with sustained and steady GDP growth, rising from 2.4% in 2014 to 4.11% in 2018. The unemployment curve has also reversed, falling from 10.8% in 2015 to 5% in 2019.
The country benefits from a solid financial system and an advantageous geographical location at the crossroads of Central Europe. It offers a high-quality production platform for Europe's automotive and electronics industries, with a labor force that remains cheap and skilled. After years of fiscal austerity, the current government has taken a number of measures: raising the gross minimum wage (from €380 in 2015 to €520 in 2019), increasing social benefits, free rail transport for pensioners and vacation vouchers. Nevertheless, the country remains vulnerable to external shocks, and its healthy growth, mainly driven by exports, will evolve in proportion to the economic dynamism of its European partners.
A closer look at these data is also useful, as there are marked inequalities between the Bratislava region in the west, the fifth richest area in the European Union, and the disadvantaged regions in the center and east of the country, which European funds are struggling to reduce. The inhabitants of these regions, victims of real European disenchantment, feel on the bangs of Western Europe and its development. Their reality is far removed from that of western Slovaks. The economic boom is not benefiting everyone, and a large part of the Roma population in the east is marginalized, as are the Magyar-speaking regions in the south.
A qualified population
One of Slovakia's strengths lies in the fact that 2.7 million people - half of its total population - are highly qualified, a boon for foreign investors, particularly in the automotive sector. Today, Slovakia's strong industrial tradition, advantageous tax system, inexpensive and skilled workforce, rapidly developing infrastructure boosted by an influx of European funds and enviable growth make this catching-up country a preferred destination for trade, industrial cooperation and foreign investment. The automotive sector is taking advantage of these favorable characteristics to set up numerous production lines in Slovakia. The arrival of Volkswagen in 1992 created a stir among other foreign investors: Sony, Lucus, Johnston Controls, Yazaki, Peugeot, Hyundai/Kia, Jaguar Land Rover. With a population of 5.4 million, Slovakia is the world's largest per capita producer of cars. The automotive industry now accounts for 44% of the country's wealth.
In addition to automobiles, other important sectors include heavy industry, iron and steel (metals and metal products), energy (electricity, gas, coal, oil, nuclear), textiles, IT development, electrical and optical appliances, rubber products, paper and printing, ceramics, but most of these are still undergoing restructuring. The industrial sector's contribution to GDP is 34.5%.
Forces..
Slovakia's modern service sector is a driving force in the national economy, contributing around 61.5% to GDP and employing around 73.2% of the workforce. It is dominated by trade and real estate. In most regions, the market is dominated by large groups at the expense of small local businesses. There are still many anti-competitive structures in oligopolistic or quasi-monopolistic situations, particularly in the agri-food industry. There are still close links between these business leaders and those high up in the chain of power. However, the arrival on the market of major foreign groups such as Metro and Tesco is tending to alter this imbalance of power and rationalize distribution channels. The Bratislava Stock Exchange (BCPB) was created in 1991 and began trading in 1993. Since then, it has remained the smallest stock exchange in Central Europe.
Tourism in Slovakia is also lagging behind, but its development suggests that it will become one of the most important sectors of the Slovak economy in the years to come. It is currently the most dynamic sector. Slovakia is becoming increasingly aware of its tourism potential, and is making progress in this area year on year. To continue developing, it will need to continue modernizing its infrastructure and communications network, and work on its international image to raise its profile.
... and weaknesses
Just over a third of the country's surface area is devoted to agriculture. Agriculture's weight in the economy has been steadily declining for decades. Its contribution to GDP is just 4%, making the country a net importer of agricultural products. This industry is not very competitive, as it is poorly managed and often organized into cooperative farms. The livestock sector (pigs, cattle, poultry) performs less well than the plant sector, which is taken over by large companies.
If we compare Slovakia's growth rate with that of its European partners, we can see that its economy is doing well. However, managers need to bear in mind the structural problems facing Slovakia: regional disparities, inadequate infrastructure, an ageing population, long-term (albeit declining) unemployment, and a high export concentration in the automotive and consumer electronics sectors.
Cocorico
Slovakia is an attractive country for foreign companies, so the French are rushing to occupy the land. Today, there are 400 French companies in Slovakia, employing over 35,000 people. Major French companies include Orange, now the country's leading cell phone operator, and above all the Peugeot plant, which has been based in Trnava since 2006 and has become the most competitive in the PSA Group. This facility has facilitated the arrival of some thirty French equipment manufacturers, including Valeo, Faurecia and Total. BNP Paribas is also present, while Chèque Déjeuner, the famous luncheon vouchers, are displayed in every window - and in French, please! In the energy sector, Engie (Gaz de France) has become a major shareholder in the Slovak Gas Company. In 2008, Veolia won two tenders to manage water and wastewater services for 950,000 inhabitants.
Slovakia's place in world geopolitics
In terms of foreign policy, Slovakia has been a member of NATO since March 2004. Slovakia's relationship with Russia is pragmatic, not least because of its strong energy dependence. On the one hand, two-thirds of the energy raw materials it consumes come from Russia. On the other hand, it derives substantial revenue from the transportation of Russian gas to Europe through its territory. It is therefore committed to maintaining dialogue and lifting sanctions against Russia. It maintained good relations with the Trump administration and provides material and technical support to Ukraine, notably through the Višegrad group. Finally, the Balkans have long been a priority of Slovakia's foreign policy. It sees this area as a key region for European security, which is why it is in favor of EU enlargement to the Western Balkans.
Murder of a journalist and corrupt government
On February 21, 2018, young Slovak investigative journalist Ján Kuciak and his fiancée were shot dead in their home. He was investigating links between the Calabrian mafia (the 'Ndrangheta) and Slovak politicians. In March, the murder triggered a wave of demonstrations across Slovakia against corruption and government policy. These were the biggest demonstrations in Slovakia's history since the Velvet Revolution of 1989. In the midst of the crisis, Prime Minister Robert Fico and two of his ministers were forced to resign on suspicion of embezzlement of European funds.
More than a year later, the investigation is still underway, and the noose is now tightening around an oligarch and local underworld figure, Marián Kočner. This unprecedented crime has shaken the country and the upper echelons of power. The electorate's reaction of distrust towards the government coalition will be felt directly in the March 2019 presidential elections.
A wind of hope named Zuzana Čaputová
Zuzana Čaputová, a 46-year-old lawyer by training, won the March 2019 presidential elections by a wide margin with 58.40% of the vote against Maroš Šefčovič. A new figure on the political scene, she based her campaign on the fight against corruption and advocated a liberal policy. For many, she represents a counterweight to the populists in power. Representing a new political trend, her political career is often compared to that of Emmanuel Macron. Carried by voters thirsting for renewal in a country plagued by corruption, she brings a breath of fresh air and hope, even if she won't hold the reins of the country, as Slovakia gives very little power to the president. The Slovak Republic is a parliamentary democracy. The President of the Republic is elected for a five-year term by universal suffrage, renewable once consecutively. The Head of State has fairly limited powers. He appoints the Prime Minister, whose majority is determined by the legislative elections, is head of the armed forces and appoints the highest magistrates. The official name of parliament is the National Council of the Slovak Republic (NRSR). This single chamber is made up of 150 deputies elected for four years by proportional representation, with a threshold of 5% of the vote. The Prime Minister holds executive power and forms the government, which is accountable to Parliament. Executive, legislative and judicial powers are clearly separated. The independence and impartiality of the courts are enshrined in the Constitution.
Zuzana Čaputová's election sounds a strong warning to the populist left of the current government, and the February 2020 parliamentary elections will hand over the keys to power, but to whom?
