The Economic and Political Environment
Slovakia has made significant economic reforms since its separation from the Czech Republic in 1993. Reforms to the taxation, healthcare, pension, and social welfare systems helped Slovakia consolidate its budget and get on track to join the EU in 2004 and to adopt the euro in January 2009. Major privatizations are nearly complete, the banking sector is almost entirely in foreign hands, and the government has helped facilitate a foreign investment boom with business friendly policies.
Slovakia's economic growth exceeded expectations in 2001-08 despite a general European slowdown. Unemployment, at an unacceptable 18% in 2003-04, dropped to 7.7% in 2008 but remains the economy's Achilles heel. Foreign direct investment (FDI) accounted for much of the growth until 2008. Cheap and skilled labor, low taxes, a 19% flat tax for corporations and individuals, no dividend taxes, a relatively liberal labor code and a favorable geographical location are Slovakia's main advantages for foreign investors.
Foreign investment in the automotive and electronic sectors has been especially strong. To maintain a stable operating environment for investors, the European Bank for Reconstruction and Development advised the Slovak government to refrain from intervening in important sectors of the economy. However, Bratislava's approach to mitigating the economic slowdown has included substantial government intervention and the option to nationalize strategic companies.
RADICOVA's government, in power since July 2010, has allowed the budget deficit to rise slightly, to 7.4% of GDP in 2010. GDP fell nearly 5% in 2009 before gaining back 4% in 2010, and unemployment rose above 12% in 2010, as the global recession impacted many segments of the economy.
Key economic indicators:
- Population: 5,477,038 (July 2011 est.)
- GDP (purchasing power parity): $121.3 billion (2010 est.)
- Per capita GDP: $22,200 (2010 est.)
- Real GDP growth: 4% (2010 est.)
- Unemployment: 13.5% (2010 est.)
- Public debt: 41% of GDP (2010 est.)
The Banking Environment
Export partners are Germany 21.4%, Czech Republic 12.6%, France 6.7%, Italy 6.4%, Poland 6.2%, Hungary 6%, Austria 5.8%, UK 4.8% (2006)
Import partners are Germany 22.1%, Czech Republic 17.3%, Russia 9.2%, Hungary 6.7%, Austria 5.1%, Poland 4.9%, South Korea 4.7% (2006)
The National Bank of Slovakia (“NBS”).
There are 31 banks operating in the Slovak Republic. Most of the domestic banks are foreign-owned.
Both residents and non-residents can have EUR and foreign currency accounts, and they can attract interest or go into overdraft. Residents require an NBS permit to hold an account outside Slovakia.
Export proceeds (goods, services, invisibles) must be brought back into Slovakia within 30 days of occurring. Residents may not hold accounts abroad without an NBS permit.
An NBS permit is also needed for foreign investment in countries outside the OECD and EEA.
Lifting fees can apply to cross-border payments unless negotiated. This is a nebulous area and should without doubt be addressed with the bank.
Central Bank Reporting
The following must be reported:
- All payments between residents and non-residents over SKK1 million
- Accounts of residents that are held outside Slovakia and their balances (assuming that an NBS permit was obtained to hold the account at all)
- Reporting is monthly