The Slovak economy is projected to grow by 4.2% in 2021 and 5.2% in 2022. After a strict lockdown in early 2021, domestic demand will rebound from the second half of the year as vaccines continue to be rolled out and most containment measures are lifted. Investment will accelerate in 2022, aided by EU structural funds and the new EU Recovery and Resilience Facility. Unemployment will fall gradually, but still remain above pre-crisis levels at the end of 2022.
The sectors most affected by the pandemic (i.e. tourism, retail, and construction) traditionally provide seasonal or temporary jobs for vulnerable workers, notably low-skilled, women, youth, and marginalised Roma. The pandemic highlights a need to strengthen skills across the population. This will improve employability of vulnerable groups, boost productivity, make the economy more resilient to future shocks and prepare it to make the most out of digitalisation.
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2021 Structural Reform Priorities
Since joining the OECD in 2000, the Slovak Republic has continuously ranked among the fastest growing OECD economies, progressively catching up with higher-income countries. Labour market performance and living standards have improved at a high pace, while inequality remained low. In 2019, the typical Slovak worker earned 70% more than 20 years earlier.
Macroeconomic and financial stabilisation, privatisations, changes in business regulations, tax reforms and policies to foster labour market dynamism were all key to promote economic growth and convergence to higher-income countries. Together with its favourable geographical position, this contributed to make the Slovak Republic one the most sought-after investment destinations in Europe.
The Slovak economy remains strong. Employment has reached a record high, and unemployment is at its lowest level since 1993. Short-term growth prospects are good. Thanks to sustained economic growth, almost 4% on average in the last two decades, living standards have converged towards the OECD average, and public debt has declined in relation to GDP. Export-led expansion has been driven by continuing inward investment in the car industry, strong integration into global value chains and resulting improvements in labour productivity. Growth has spilled over into the domestic services sector to some extent, but productivity gains there have been much lower. Strong wage growth is fuelling consumption, inflation and house prices. Household indebtedness has been rising rapidly. The authorities will have to continue to use fiscal and macro-prudential policies to avoid overheating.