Modeling Economic Growth in Contemporary Slovakia

After 1989, the Czechoslovak economy faced very many challenges related to the transition process from centrally planned system to the market economy. The main goal of the transformation was the liberalization of prices and foreign trade. After the price and trade liberalization has been introduced a critical part of transformation, including the small and large scale of privatization. The price and foreign trade liberalization, including the small and large privatization, had very negative impact on the economic activities. After relatively successful transformation, the authorities from both the Czech and the Slovak Republic decided on a peaceful division on separate of two republics, the Czech and Slovak republics since January 1st, 1993. Historically, the main institutions during the Czechoslovak republic were located in the Czech Republic, in particular, central banks and other federal institutions. In addition, the structure of the Slovak economy was relatively less developed in comparison with the Czech economy. The Slovak authorities were able to build the institutional and legal frameworks for the Slovak economy. During 1993, the Slovak economy was under many pressures due to the relatively low level of the foreign exchange assets, deep external imbalances, and high level in inflation. Furthermore, it was needed the restructuring of the enterprises, dealing with bad debt in the banking sector etc. Despite all obstacles related to the overall transformation process, including the creation of new institutions for a new country, the Slovak economy started to adjust to new market economic conditions relatively well.

This chapter provides a detailed analysis of Slovakia's economic transformation since the end of the socialist era and its transition toward a market-based economy. The country had a slower start than Poland, Czechia, and Hungary in embracing capitalism, which earned it the nickname of the “Tatra Tiger” only after Dzurinda's administration. The chapter examines the crucial economic reforms, political decisions, and contextual factors that have shaped Slovakia's economic trajectory, particularly emphasizing the interplay between politics and economic policy. Additionally, it highlights the challenges posed by the legacy of previous governments, including oligarchic influence and socioeconomic disparities. Despite some periods of economic growth, Slovakia is currently facing a crisis of political and socioeconomic discontent, primarily due to overdependence on the automotive sector and a lack of investment in innovation and infrastructure. The chapter concludes by stating the need for more visionary leadership and a national dialog on Slovakia's future direction, indicating a concerning inertia in the face of pressing economic challenges.

During the short history of Slovakia as an independent state, economic convergence has been at the center of the attention of policymakers and public figures. Even after becoming a member of many important international organizations (e.g. European Union, OECD, NATO), Slovak discourse still focuses on comparison with the Visegrad Group countries or with so-called new EU Member States. In this chapter, based on several rankings covering relevant economic indicators, we describe the development of Slovak's position globally (Global Competitiveness Index, Ease of Doing Business, GDP p. c.) or specifically among the EU Member States (convergence to EU average in selected indicators). We also explain these changes in connection to the specific development of the Slovak economy.

The aim of this chapter is to combine a number of critical approaches to economic growth as the dominant policy framework and measure of performance in Slovakia. The dominant policy discourse in Slovakia continues to perceive economic growth, GDP per capita as well as the other economic indicators as the primary measures not only of economic performance but also of public policy and standards of living. Recognizing that as important as they are, they remain measures and means rather than outcomes and goals, it will explore more human welfare-centered and environmentally considerate measures in the context of Slovakia, arguing that both scholars and policymakers need to go beyond the national level of analysis and traditional quantitative methodologies. From a human and welfare perspective, the chapter will look at the Human Development Index (HDI) in Slovakia as an example of an indicator to study the quality of life. It will also problematize more broadly whether focus on growth in the context of climate change-related challenges and the EU Green Deal is still a viable and the most appropriate measure to follow, and to what extent sustainability has been sufficiently integrated and used in Slovakia, in this regard. The chapter will also offer concrete areas where insights from the critical perspectives might be most relevant in the context of Slovakia.

The globalized economic environment is a reality of our time, and the free market is an organic part of it. In the European Union, the free market is one of the key pillars of its functioning. The free movement of labor, capital, goods, and services contributes to long-term and stabilized economic and social development. When monitoring and analyzing the free market, the labor market deserves special attention. The information provided reflects Slovakia's labor market for 2000–2020, in which the country was undergoing significant social and economic changes. It was joining the European Union and the euro area. Many privatization projects continued, as well as modernization and building of new business capacities. However, their successful use required new sources of labor and a new labor market organization. Therefore, in this chapter, we provide information about the status of the labor market in the context of economic development. We also point out the level of unemployment in relation to the structure of the labor force. The chapter aims to provide principal information about changes in the labor market in Slovakia and its determinants from the external environment.

The residential real estate market represents the entire complex of economic and social relations at the macroeconomic and microeconomic levels. This publication aims to evaluate developments in the field of financing and the development of the residential real estate market in Slovakia, with a special focus on the determinants affecting the demand, supply, and prices of residential real estate in Slovakia and Bratislava. Owner-occupied housing is the dominant type of housing and has a significant impact on the development of housing issues. Research into the issue of multiple ownership of real estate provides answers to questions about the growth of real estate prices in the conditions of Bratislava. The influence of financial indicators, especially interest rates, the availability of housing loans, and the regulation of the banking sector explain the essential connections in the area of the development of residential real estate prices and factors of their development. The analysis points to the need for the development of rental housing in Slovakia.

Given the fact that Slovakia is a small, open, export-oriented economy strongly dependent on foreign trade and foreign direct investment (FDI) inflows, this chapter seeks to analyze the country's performance in international trade and investment flows as well as its foreign economic policy in the field of export and investment promotion. This chapter points out that Slovakia's foreign trade and inward FDI flows are highly interconnected due, inter alia, to the lion's share of foreign companies in Slovak exports. In addition, Slovakia's largest comparative advantages in exports are “acquired” through FDI inflows and include products of the automotive and electronics industries. However, the way in which Slovakia is involved in international trade and investment flows reflects its reliance on lower value-added economic activities, such as, in particular, the assembly of motor vehicles from imported intermediate products. In order to increase international competitiveness of the Slovak economy and ensure its future economic growth, it is important to improve the effectiveness of Slovakia's foreign economic policy and economic diplomacy, diversify the territorial and commodity structure of Slovak exports, support the expansion of Slovak companies abroad, as well as attract FDI with higher added value and to less developed regions.

Large regional differences in Slovakia existed already at the beginning of the 20th century, which resulted in emigration mainly from the east of the territory. The subsequent popularity of the communist regime is explained by a successful reduction in the regional disparities and increased well-being of the inhabitants. The transformation since 1990 ignored important regional differences among the Czech and Slovak regions and this led to the disintegration of Czechoslovakia. Governance structures in Slovakia remained centralized. This harmed the welfare – weaker economic performance of the regions and worse results of the labor market. The underutilization of the economic potential of regions has consequently slowed down the catching up at the national level. Slovakia thus so far missed the opportunity to use transfers from the European Union more productively. In recent years, however, there has been some progress in changing the unsatisfactory model of public governance to a more modern one, with much greater decision-making and financial autonomy for the regions.

In observing several Central and Eastern European Union countries facing systemic challenges to their dependent growth models, most notably Hungary and Poland, the resilience of foreign-dependent and export-led growth in Slovakia remains puzzling, especially in the context of relatively high levels of socioeconomic disintegration. Failing to identify the systemic distinctions of Slovakia's GM growth model against the backdrop of the broader political economy of the Visegrad region, this chapter seeks to explain the apparent differences through the politics of growth model approach, adjusted for the purposes of advanced peripheral economies. It is argued that an important explanans to the resilience of foreign-dependent growth in Slovakia can be traced back to the unexpected constellation of neoliberal forces governing in the early 2000s and their implementation of avant-garde neoliberal policies aimed at outbidding regional competitors in foreign investment attraction. Facing growing socioeconomic discontent and anticipating that national populists would assume power, the outgoing neoliberal government tied the hands of its successors by committing to a euro adoption strategy, which the subsequent administration was unable to reverse. Consequently, the lasting resilience of Slovakia's growth model lies in the interactions between a cross-class enduring domestic growth coalition with a trans-coalitional commitment to catering to the needs of transnational manufacturing capital on the one hand, and external constraints, most notably membership in the European Monetary Union (EMU), on the other.

The automotive industry in Slovakia underwent a steep development pathway during the last 20 years, mostly thanks to the inflow of foreign direct investments, resulting in increasing production outputs, exports, and employment. In this chapter, we highlight the limits of this growth, pointing out on production function of the industry heavily based on foreign capital. Under the current challenges of production digitalization, automatization, and car electrification, the position of the country seems uncertain. As a response, the government of Slovakia, but also others in the region, embarked on supporting new wave of foreign direct investments mostly in battery production and in the case of Slovakia also attracting a fifth car manufacturer. We conclude that this strategy fixes the current dependency on foreign capital and know-how rather than allows for upgrading.

Innovation is a pillar of competitiveness and a tool for transforming society toward sustainable development. Investment in research, development, and innovation comes from both private and public sources. However, corporate investment is lower than the European Union (EU) average, partly due to the structure of Slovakian companies within value chains. A significant portion of innovation comes from imports, reflecting a low focus on preproduction and postproduction phases of production within Slovakia. The government provides varied institutional support for research and development, including tax incentives for innovation. Additionally, digitalization is underway through the Industry 4.0 concept. Retaining and attracting skilled information technology (IT) professionals from abroad is crucial, as the IT sector offers an attractive environment for talented individuals. Enhancing the knowledge society requires collaboration from all stakeholders to employ more creative people within Slovakia. Imported innovations dominated the scene, but in recent years, companies have been increasingly investing in the domestic R&D and innovation. The necessity of digital transformation is a theme in discussions of Slovak society. It's a prerequisite for successful adaptation to the ongoing changes the country is facing.

Business service centers (BSCs) are a crucial part of Slovakia's economy, employing around 40,000 highly skilled workers and playing a significant role in the growth of service exports. The industry is mainly concentrated in Bratislava, the capital city of Slovakia. However, Košice, located in Eastern Slovakia, is playing an increasingly important role in information technology (IT) outsourcing. The employees of BSCs create higher value compared to other industries, which allows BSC operators to offer higher wages. Despite experiencing layoffs in the past, BSC operators in Slovakia currently have stable positions. However, to ensure the long-term sustainability of the industry, the government needs to provide more focused support. This support should aim to secure the highly skilled workforce required for the industry, whether from Slovakia or abroad. Although the industry is not immediately threatened by the ongoing artificial intelligence (AI) revolution, most BSC operators are preparing their units for the further automation of their processes.

The aim of the chapter is to clarify the importance of culture and tourism in the economy of Slovakia in the context of social and economic changes in recent years. Culture as a part of every society, an element that defines, unites, and at the same time divides, today undoubtedly belongs to the economic activity of the country with its material outputs. In the last two decades, the share of culture and creative industry in gross domestic product (GDP) has been growing both in the entire Union and in Slovakia. Despite the fact that Slovakia has a huge cultural capital that can be transformed into cultural output, this area is often outside the interest of policymakers. However, culture is a catalyst for economic growth, a tool for regional development, a source of employment, and a contributor to social inclusion. Together with tourism, they represent a significant potential for regional development in Slovakia.

Chapter concentrates on similarities and dissimilarities of both Czech and Slovak economy since start of the economic transformation at the begin of 90s. Authors closer look on economic development before both countries joining the European Union (EU) May 1st, 2004 and before Slovakia joining Eurozone by January 1st, 2009. Both impact of membership in EU and Slovak membership in Eurozone provides ground for identification of economic trajectories of both economies during economic transformation and after joining EU and in case of Slovakia Eurozone. Authors try to solve the puzzle if both economies behave rather as a twins or unique cases.