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Published on 26 September 2005
Executive summary
An Economic Survey is published every 1½-2 years for each OECD country. Read more about how Surveys are prepared.
The OECD assessment and recommendations on the main economic challenges faced by the Slovak Republic are available by clicking on each chapter heading below. Chapter 1 identifies the challenges for which the subsequent chapters provide in-depth analysis and policy recommendations.
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Chapter 1. Key economic challenges facing Slovakia
This chapter discusses the key challenges facing the Slovak economy. The far reaching economic reforms have made Slovakia a reference country in sustained macroeconomic stabilisation and structural reform, and triggered strong foreign direct investment inflows which have accelerated growth and catching up. There are a number of remaining tasks to consolidate the reforms, to broaden growth, to make it sustainable and more job rich, and to accede smoothly to the Economic and Monetary Union (EMU). Four challenges are addressed in this chapter: i) preserving macroeconomic stability and preventing pitfalls on the road to EMU; ii) stimulating labour demand for low skilled workers; iii) improving conditions for innovation and growth; and iv) modernising the public sector without increasing the fiscal costs.
Chapter 2. Policies to smooth the path to euro area accession
Although Slovakia is making good progress towards fulfilling the Maastricht criteria for accession to the euro area, the challenges posed by the “impossible trinity” suggest that risks still remain. Recent fiscal and inflation outcomes have been good and the strong appreciation pressures on the koruna have recently abated. However, the risk of excessive exchange rate appreciation combined with a rebound in inflation cannot be eliminated, along with the risk of insufficient fiscal consolidation. A number of policy guidelines are proposed to minimise these risks and to underscore the credibility of Slovakia’s commitment to structural reform and prudent macroeconomic management.
See also ECO Working Paper 444 The challenge of EMU accession faced by catching-up countries: A Slovak Republic case study
Chapter 3. Policies to boost job creation and improve labour mobility
Slovakia’s relatively low employment rate is one of the factors contributing to lower levels of GDP per capita than in other OECD countries. However, recent reforms have already made significant progress towards raising the employment rate and further employment growth is expected. There are a number of additional policies that could promote faster employment growth. With respect to labour demand for low-skilled workers, who are the most abundant among the unemployed, this chapter argues that the cost of low paid labour should be significantly reduced, either by significantly cutting employers’ social security contribution rates for low wage workers or by reducing the minimum wage. With respect to labour supply, the housing market is identified as a major obstacle to regional mobility of labour supply, and significant policy changes for this sector are recommended.
See also ECO Working Paper 448 Slovakia's introduction of a flat tax as part of wider economic reforms
Chapter 4. Improving conditions for innovation and growth
This chapter discusses policy reforms in a wide range of structural policy areas that may help to raise productivity and the level of human capital in the economy and prompt additional job creation. It highlights the fact that Slovakia is only part way through a major transformation of the economy. In some policy areas, such as labour and product market regulation, Slovakia now boasts economic policies that rank around the middle or top half of the OECD. At the same time, other building blocks of the economy, most notably the legal system and the education infrastructure, are unable to keep up with the demands placed on them by the modern business sector. The chapter recommends taking a broad interpretation of innovation, and emphasises the importance of reforms to promote the up skilling of the wider population, in order to broaden the potential for the creation and diffusion of the global stock of knowledge. Similarly, further improvements to the business environment, particularly in the legal and judicial system, are necessary to foster a competitive and efficient environment and create conditions conducive to dynamic enterprise creation and small and medium sized business success.
Chapter 5. Building a modern public sector
This chapter describes Slovakia’s efforts to build a modern public sector. The building blocks are an important fiscal consolidation since 2000, the establishment of stronger fiscal institutions, a far reaching administrative decentralisation and a strategy of rationalisation of expenditures. Quantitative revenue, expenditure and deficit targets are well rooted in a credible medium term framework. Assuming that the fiscal risks induced by administrative decentralisation and the spending pressures in the social security system are reined in, qualitative improvements in public governance and services remain the most difficult part of the public sector reforms. This chapter argues that modernising the public sector will require: a further reinforcement of fiscal institutions; greater use of strategic priority setting, results oriented budgeting, performance based pay and personnel management; and a wider recourse to market mechanisms in the provision of services. Care should be taken to ensure that decentralisation helps to accelerate rather than hinder the implementation of these reforms. More effective public management in education, active labour market support (notably for the poorly employed Roma minority), and strengthened sustainable development and competition policies will be particularly important for future growth.
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A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.
To access the full version of the OECD Economic Survey of the Slovak Republic:
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Readers at subscribing institutions can go to SourceOECD, our online library.
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Non-subscribers can purchase the PDF e-book and/or printed book at our Online Bookshop.Government officials can go to OLISnet's Publication Locator
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For further information please contact the Slovak Republic Desk at the OECD Economics Department at webmaster@oecd.org. The OECD Secretariat's report was prepared by Rauf Gonenc and Anne-Marie Brook under the supervision of Wilhelm Leibfritz.
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