Private consumption and inventories drive growth


LOW RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

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GDP USD87.3bn (World ranking 64, World Bank 2015)
Population 5.42mn (World ranking 115, World Bank 2015)
Form of state Parliamentary Democracy
Head of government Robert FICO (Prime Minister)
Next elections 2019, presidential
  • Low systemic political risk
  • Good regional and international relations; EU membership
  • Eurozone membership providing for low transfer and convertibility risk
  • Solid banking sector
  • Strong business environment overall; very attractive for foreign investors
  • High dependence of the economy on the automobile sector and on exports
  • Large income inequality and high unemployment
  • Relatively high external debt level

Growth slows slightly but remains robust

Real GDP growth moderated to +3.3% in 2016 from +3.8% in 2015, mainly because fixed investment dropped by -9.3% (after a very strong performance in 2015, at +16.9%) as a result of reduced EU fund absorption. However, investment bottomed out in H2 2016 and is expected to grow modestly in 2017.

In H1 2017, real GDP grew by +3.2% y/y, driven by robust private consump­tion (+3.5% y/y) thanks to employment gains over recent years, while public spending contracted by -0.4% y/y. Fixed investment fell by -2.9% y/y in H1 (after rebounding to +0.9% in Q1, it dropped -6.7% in Q2). Similarly, foreign trade activity gained strong momentum in Q1 but was flat in Q2. As a result, exports expanded by +4.4% y/y in H1, slightly faster than imports at +4.1% y/y, so that net exports contributed +0.5pp to growth. Inven­tories added +1.5pp to H1 growth. We expect the inventory build-up to gradually wane in the course of the year while the H1 growth pattern should broadly continue otherwise, resulting in full-year growth of +3% in 2017, followed by +3.4% in 2018.  

Adequate economic policies

As expected, headline inflation turned positive again at the end of 2016 (after almost three years of deflation) and has averaged +0.9% y/y in H1 2017. Also over the past three years, monetary easing of the ECB – Slovakia is a member of the Eurozone since 2009 which provides for low transfer and convertibility risk and has substan­tially decreased external vulnerabilities related to exchange rate risk – has encouraged a rebound of private sector credit growth which reached +9% in 2016 and +11.4% y/y in May 2017, thus supporting the domestic demand driven economic recovery. We expect inflation to pick up slightly in H2 and to reach an annual average of +1.2% in 2017 and +1.8% in 2018, while continued accommodating monetary policy should help sustain reasonable credit growth.

Public finances have continued to improve. The annual fiscal deficit has been below -3% of GDP since 2013 and fell to -1.7% in 2016. We expect similar ratios in 2017-2018. Public debt rose to 55% of GDP in 2013 in the wake of the global financial crisis but has since gradually fallen to 52% in 2016 and is forecast to remain around that level in the near future.

Unproblematic external liquidity position

After four consecutive years of annual surpluses, the current account shifted to a moderate deficit of
-0.7% of GDP in 2016. Positively, it was 83% covered by net foreign direct investment inflows. Further unproblematic shortfalls of less than -1% of GDP are forecast in 2017-2018.

Trade structure by destination/origin

(% of total)

Exports Rank Imports
Germany 20%
18% Germany
Czech Republic 13%
17% Czech Republic
Poland 9%
8% China
Hungary 7%
6% Poland
France 6%
6% Hungary

Trade structure by product

(% of total)

Exports Rank Imports
Road vehicles 28%
15% Road vehicles
Telecommunication and sound recording apparatus 14%
11% Telecommunication and sound recording apparatus
Electrical machinery, apparatus and appliances, n.e.s. 7%
8% Electrical machinery, apparatus and appliances, n.e.s.
Other industrial machinery and parts 6%
5% Other industrial machinery and parts
Iron and steel 4%
4% Manufactures of metal, n.e.s.

The payment behavior of domestic companies is quite good, however according to the data for 2016, companies or entrepreneurs in Slovakia pay after the due date in 27% of cases.

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings

The legal system suffers from a persisting lack of trust in the rule of law, while the legal process is overly slow. Domestic debtors often use the system to delay legal proceedings and enforcement attempts as much as possible.

Debt restructuring mechanisms may help collect debts, but overall recovery chances remain extremely low when legal proceedings have been delayed and the debtor has become insolvent.


Contact Euler Hermes

Economic Research Team

Contact Manfred Stamer

Senior Economist for Emerging Europe and the Middle East 

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