OECD Economic Surveys: Slovak Republic 2026

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OECD Economic Surveys: Slovak Republic

25 June 2026

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2. Boosting economy-wide competitiveness amid acute automotive sector challenges

Copy link to 2. Boosting economy-wide competitiveness amid acute automotive sector challenges

Erik Frohm

Federico Giovannelli

Richard Kubas

Branislav Žúdel

Abstract

Persistent geopolitical challenges and structural change pose significant risks for the Slovak Republic and its globally integrated automotive sector. These changes demand an adaptable and diversified economy that can reap the gains from new innovations and business models. To sustain strong productivity growth and ensure competitiveness, the Slovak Republic must build on its existing strengths and enhance its dynamism. Manufacturing of technologies necessary for the green transition and further digitisation present new growth and job opportunities. Tackling corruption, reducing administrative burdens and improving the tax system would strengthen the business environment. Fostering business research and development and attracting FDI, as well as increasing the efficiency of public investment, would help advance innovation and technological diffusion, thereby enabling economic diversification within and outside the automotive sector and allow companies to perform more advanced tasks in global value chains. Better education and life-long learning would further develop human capital, alleviate persistent skills shortages and enhance long-term competitiveness.

2.1. Slowing economic growth with significant challenges on the horizon

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Improving productivity growth is key to boost competitiveness and living standards over the longer term. Over the past 25 years, the Slovak Republic has prospered and converged towards higher income countries in the OECD and the European Union. The gap in GDP per capita, which was large in 2000 at 65% of the EU average, has narrowed but remains substantial at 43% in 2024 (Figure 2.1, Panel A). Over the same period, labour market outcomes have improved markedly while income inequality remained comparatively low. These positive developments have been underpinned by a combination of macroeconomic and financial stabilisation, privatisation, reforms to taxation and business regulation, and policies that have enhanced labour market flexibility. Large inflows of foreign direct investment (FDI), particularly in the automotive sector, helped integrate the Slovak Republic into European and global value chains.

Despite progress, convergence has slowed in recent years, both in comparison to the Slovak Republic’s own historical trajectory and relative to neighbouring countries. Since the Global Financial Crisis (GFC), real GDP per capita growth has fallen below that of other Visegrád countries (Czechia, Hungary and Poland). The gap in living standards with key trading partners has also remained substantial since the COVID-19 pandemic. A decomposition of the GDP per capita gap with Germany for example, suggests that the bulk of the gap is due to lower total factor productivity, pointing to a large role to play for structural policy to increase competitiveness (Box 2.1).

The Slovak economy is facing several challenges in the short term, like significant fiscal consolidation needs, higher trade barriers and persistent economic uncertainty (see Chapter 1). Cyclical factors are especially important for the automotive sector, and in the Slovak Republic in particular (Klein and Koske, 2013[1]; Klein, Høj and Machlica, 2021[2]). Major structural challenges are at the same time weighing on the Slovak Republic’s medium-term growth prospects. Global geopolitical tensions, the transition to net-zero emissions and higher energy prices are clouding the outlook for competitiveness - particularly in the automotive sector which is already facing structural change.

Real value added in the Slovak automotive industry has been weak since COVID-19 and was broadly at the same level as seven years ago in 2023 (Figure 2.1, Panel B). Still, the sector has a revealed comparative advantage and together with supplying industries contributes to 10% of Slovak real value added and about 3% of employment (Box 2.2). Economic activity is heavily reliant on foreign demand and is dominated by multinational enterprises (MNEs) active in global supply chains, and the Slovak automotive sector remains concentrated in lower-value-added activities such as imports of foreign inputs and assembly. Productivity spillovers to domestic companies have been weak, and Slovakia has yet to significantly move up the value chain into more advanced tasks like design, research and development or marketing (OECD, 2022[3]). The domestic value-added share in gross exports has declined and is currently the lowest in the OECD (Figure 2.1, Panel C).

A more dynamic business environment could help the economy better adapt to global shifts, diversify the sources of growth, and help companies capture the benefits of new technologies. For example, increasing the adoption of digital technologies would allow the Slovak Republic to better draw on the gains from scientific advances, including AI (see Chapter 3). The country has the potential to become a key manufacturing location for the EU net-zero transition with major expansions ongoing in electric vehicle production and gigafactory-scale battery plants (see Chapter 4). The defence industry is another area of growth, as geopolitical tensions and uncertainty remain high, boosting demand for military and defence equipment. The Slovak Republic hosts several large defence companies producing ammunition, artillery systems and other equipment, and is well-positioned to respond to increasing demand. Since 2021, Slovak arms trade has risen substantially, with exports roughly doubling from 0.4% of GDP in 2022 to 0.9% in 2024 and imports seeing similar increases.

Higher spending on research and development (R&D) and enhanced human capital could allow companies and sectors, including automotive and related industries, to “move-up” the value chain by performing more advanced tasks and innovation. Business creation, exit and churn rates are relatively high by OECD standards. However, fewer workers are employed in high-growth companies, and a disproportionate share remain in micro-enterprises (fewer than 10 employees) (Figure 2.1, Panel D). Start-ups often struggle to scale and integrate into broader European markets, hampering diversification. The uptake of digital technologies lags OECD and regional benchmarks, and innovation capacity among micro, small and medium-sized enterprises (MSMEs) remain limited.

Figure 2.1. Economic convergence has stalled
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Several structural barriers continue to impede competitiveness and sustained income convergence. Weak judicial independence and widespread perceptions of corruption undermine investor confidence and economic efficiency. Complex administrative procedures and an inefficient labour and corporate tax system constrain company growth. Product market regulations are stricter than the OECD average (Figure 2.3 Panel A), and business investment in research and development (R&D) remains far below OECD and regional levels (Figure 2.3, Panel B). Inward FDI flows have declined, and relative to GDP, the stock is now lower than among other Visegrád countries (Figure 2.3, Panel C). Long-standing skills shortages hamper company expansion and investment, and the vacancy-to-unemployment ratio remains elevated compared to pre-pandemic levels (Figure 2.3,Panel D).

Box 2.1. The gap in GDP per capita is primarily due to low TFP

Copy link to Box 2.1. The gap in GDP per capita is primarily due to low TFP

This box decomposes the Slovak gap in GDP per capita with its largest trading partner Germany, using a growth accounting framework with time-varying labour shares. Growth accounting provides a structured way to illuminate the contribution from inputs such as capital and labour, and how well those inputs are used as captured by total factor productivity (TFP). The approach highlights whether income gaps stem primarily from low employment rates, insufficient capital accumulation or low TFP. Importantly, capital accumulation and TFP growth does not typically operate in isolation; rather, an increase in the capital-output ratio is often accompanied by higher TFP convergence, reflecting greater diffusion of company-embedded productivity such as management practices, intangible assets, and technological blueprints, facilitated by the presence and operations of multinational enterprises.

Overall, the Slovak gap in per capita GDP compared to Germany is 58%, with more than half of the gap (64%) driven by lower total factor productivity (TFP), whereas shortfalls in capital stock and employment also contribute considerably (Figure 2.2). The TFP gap is particularly evident in market-oriented sectors, where performance has stagnated over time. Despite the production of high-end automobile models, convergence with German industrial productivity has progressed slowly. In automotive manufacturing in particular, the situation is acute, with TFP reaching only 40% of the German level.

Roughly on third of the GDP per capita gap with Germany stems from a lower capital intensity, which had converged rapidly in the years leading up to 2008 due to strong inflows of foreign direct investment (FDI) that has stagnated since. However, the Slovak Republic continues to exhibit the smallest capital intensity gap than other Visegrád countries.

The employment gap, accounting for the remaining quarter, is only partially offset by a higher number of hours worked per employee. Labour market constraints have translated into a marked slowdown in GDP growth. At the same time, hours worked per employee in the Slovak Republic have declined significantly faster since 2013 than in peer economies, keeping labour productivity growth per hour worked stable over the past decade. For example, hours worked fell by 8% since 2013, whereas hours worked only fell by 3% in the OECD average and increased by 1% in Czechia. Expanding labour participation would not only boost GDP per capita but also generate additional government revenues, supporting progress towards fiscal sustainability (see Chapter 1).

Figure 2.2. The gap in GDP is mainly due to lower TFP
Copy link to Figure 2.2. The gap in GDP is mainly due to lower TFP

GDP per capita gap in 2019, contributions relative to Germany, percentage points

Figure 2.3. Several barriers impede growth and convergence
Copy link to Figure 2.3. Several barriers impede growth and convergence

In addition, high energy prices continue to hinder competitiveness and production. Electricity and gas prices for industrial use remain above their level before the Russian war against Ukraine. Although prices have declined, they are still elevated (IEA, 2026[4]). Participating in the European Union’s joint gas purchasing mechanisms under the REPowerEU strategy can leverage collective bargaining power and secure more diversified gas supplies. Moreover, expanding energy production and implementing the simplification procedures adopted in 2025 will be key to the deployment of low-carbon energy sources thus strengthening energy security, whilst also reducing carbon emissions (see Chapter 3 in this Economic Survey).

To sustain growth and strengthen resilience in the face of emerging challenges, the Slovak Republic must build on its existing strengths, enhance the dynamism of its economy and diversify the sources of growth. A comprehensive policy package is needed to improve the business environment, strengthen public investment and improve skills. Reducing administrative burdens and tackling corruption would promote business dynamism and support the growth of high-productivity companies. Increasing business R&D investment and attracting FDI, as well as improving the quality of public investment, would help advance innovation and technological diffusion, thereby enabling economic diversification, and allow the automotive industry and other sectors to perform higher value-added tasks. Education and labour market reforms can further develop human capital, raise productivity, and enhance long-term competitiveness.

Box 2.2. The automotive sector is a key driver of the Slovak economy

Copy link to Box 2.2. The automotive sector is a key driver of the Slovak economy

The Slovak Republic has successfully positioned itself within the global automotive value chain. With a revealed comparative advantage in automotive exports (Figure 2.4, Panel A), the sector is the backbone of the Slovak economy. Car production is among the highest in the world with 198 cars produced per 1,000 people. Kia, Volkswagen, Stellantis and Jaguar Land Rover all have substantial operations in the country, and several suppliers and related industries are dependent on the sector (OECD, 2024[5]).

Figure 2.4. Automotive activity is shaped by foreign demand
Copy link to Figure 2.4. Automotive activity is shaped by foreign demand

Economic activity in the wider automotive industry, including vehicles as well as parts and other suppliers, contribute around 10% of total real value added and 3.4% of employment (Figure 2.4, Panel B), some of the highest shares in the OECD. The automotive sector contributes to 14% of research and development (R&D) spending in the economy. With comparatively high productivity, wages are also higher than in most other manufacturing sectors. At the same time, the sector has historically benefited from regionally low wages that have driven international competitiveness (Pavlínek, 2023[6]).

External shocks reverberate back strongly to the Slovak Republic, either directly via direct exports or indirectly along the value chain. As the global trade and economic landscape deteriorates and trade barriers rise, the Slovak Republic will be significantly negatively impacted. The share of domestic value added in the automotive sector driven by final foreign demand is 94%, the highest in the OECD. The main markets are the rest of the EU, the United States and China. While US demand generates only about 2% of value added in The Slovak Republic as a whole, for the automotive industry it exceeds 9%, higher than the rest of the Visegrád members. After Russia’s war of aggression against Ukraine, energy prices have increased substantially and are putting additional pressure on the wider industry.

In parallel with these headwinds, the European automotive sector is undergoing significant structural change that is challenging growth over the medium-term. Demand for cars in Europe remains low, and European carmakers are facing strong competition from the rest of the world, notably China (Hojdan, Kubas and Žúdel, Forthcoming[7]). New car registrations have fallen by over two million over the past years, from around 13 million before COVID-19 to around 11 million after (Figure 2.4, Panel D). Meanwhile, car imports into the EU from China have grown by more than a factor of fifteen since before the pandemic, enabling Chinese manufacturers to gain a 4% share of the market and thus substantially increasing competition in the market

Slovak auto manufacturers have been adapting to the new trends. Increased environmental awareness, the planned phasing out of combustion engines at the EU-level and rising competition from Chinese producers have accelerated the transformation of the industry towards new-energy vehicles (NEVs). For example, battery maker Gotion have invested EUR 1.2 billion into a new “giga factory”. A new Volvo Cars factory is currently being built, producing only electric vehicles (EVs) and is expected to become operational in 2027. Kia officially launched the production of the EV4 electric car at its production plant in Teplicka nad Vahom, the first fully electric Kia vehicle produced in Europe. Other manufacturers are still rebuilding their assembly lines for the NEVs and hybrid vehicles, whose exports constitute 7% of GDP, the highest in the OECD, and 46% of all vehicle exports (Figure 2.4, Panel C).

The remainder of this chapter is structured as follows. The next section examines policies to improve the business environment by streamlining regulation, foster competition and remove barriers to growth. Section 3 explores ways to increase R&D spending to boost the economy’s innovative capacity. Finally, the fourth section discusses policies to address labour and skills shortages and improve labour market efficiency.

2.2. Improving the business environment to support growth

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The Slovak Republic has made progress in strengthening its business environment over the past decades. Structural reforms, including privatisation and regulatory modernisation, have underpinned strong growth outcomes. To highlight an important milestone, the OECD's Energy, Transport and Communication Regulation Indicators (ETCR), which assess the competitiveness of regulation in network sectors, show that regulatory quality in the Slovak Republic has converged towards the OECD average since the early 2000s (Figure 2.5, Panel A), with tangible productivity gains. Estimates suggest that past liberalisations have raised labour productivity growth by 5.5% since the 1980s, with the greatest gains achieved during 1995—2023 (Andrews et al., 2025[8]). The advances have primarily accrued in manufacturing sectors using energy, transport and communication as inputs in their production processes, such as the automotive industry.

Yet, persistent weaknesses in governance and institutional quality continue to hamper business confidence. Perceptions of corruption and low judicial independence remain widespread, and trust in public institutions lag OECD comparators (Figure 2.5, Panel B). These institutional shortcomings increase transactions costs and discourage investment, underscoring the need to strengthen the rule of law, reducing administrative burdens, and improving governance to support economic dynamism and attracting foreign direct investment (FDI). State involvement in the economy remains, and regulatory barriers in some professions and sectors remain high. Further reforms to reduce taxes on labour and harmonised corporate tax rates across company sizes would improve incentives and reduce distortions that hamper growth. Likewise, remaining barriers to trade continue to limit the potential benefits from integration into the EU Single Market and global value chains.

Figure 2.5. Regulation has become more competition-friendly but trust in public institutions remains low
Copy link to Figure 2.5. Regulation has become more competition-friendly but trust in public institutions remains low

2.2.1. Strengthening the rule of law and addressing corruption

Since the last OECD Economic Survey of the Slovak Republic (OECD, 2024[9]), little progress has been observed in most areas deemed critical for strengthening the anti-corruption and public integrity system. For example, shortcomings remain on lobbying regulation, conflict of interest rules and legislation on asset declaration. Furthermore, changes to the legal and institutional framework adopted in 2024 – for instance the dissolution of the Special Prosecutor’s Office and the reorganisation of the Department for Corruption Prevention - and reforms in areas like public procurement, have raised concerns about effectiveness in strengthening public integrity and coping with high-level corruption cases (European Commission, 2025[10]; European Commission, 2024[11]). However, the effectiveness of such reforms should be further assessed in the medium and long term. The National Anti-Corruption Strategy 2024-2029, which is currently under finalisation, could represent an opportunity to address some of the current deficiencies and help mitigate the high perception of corruption (Figure 2.6, Panel A). For example, a recent EU survey shows that 85% of companies perceive corruption as widespread, compared with 65% in the EU (Eurobarometer, 2024[12]).

In 2024, important oversight institutions in the Slovak Republic underwent changes that could undermine the anti-corruption system's coordination and its overall effectiveness. Even though this might only be temporary, due to mechanisms related to the institutional reorganisation process, the number of corruption cases under investigation and prosecution dropped in 2024 (European Commission, 2025[10]; Transparency International, 2019[13]). Furthermore, the need for and the effectiveness of the reorganisation of the Department for Corruption Prevention - which is not an independent authority - have raised concerns. In 2024, the functions of the Department for Corruption Prevention - primarily consisting of guidance on corruption prevention for all public authorities and administrative levels (UNDOC, 2023[14]) - were redistributed within the Office of the Government, which remains the reference authority for corruption prevention coordination. The Special Prosecutor’s Office (SPO) was dissolved as part of the reform of the Criminal Code. The SPO was specialised in the prosecution of serious crimes, including high-level corruption cases and the protection of the financial interest of the European Union (e.g. in relation to the misuse of EU funds). Following the SPO dissolution, its prosecutors were assigned to various units within the General Prosecutor’s Office (GPO). There was no ex-ante assessment of the impact on the specialised prosecution system and on the risks of possible delays of ongoing high-level corruption cases (European Commission, 2025[10]; European Commission, 2024[11]).

Figure 2.6. Perception of corruption is high in the Slovak Republic
Copy link to Figure 2.6. Perception of corruption is high in the Slovak Republic

Following the abolition of the Special Prosecutor's Office, a new specialised division for serious crime was established at the General Prosecutor's Office of the Slovak Republic, while cases falling within the jurisdiction of the Specialised Criminal Court were transferred to eight regional prosecutor's offices. The continuity of the prosecution service's supervision of existing criminal cases falling under former SPO and the transfer of the agenda were ensured by the Prosecutor General through the issuance of several organisational acts. However, concerns remain regarding the effectiveness of this reform, as combating high-level corruption requires strong specialisation and coordination as well as adequate ad-hoc resources (OECD, 2024[15]).

The Prosecutor General has the power to annul final police and prosecutor decisions, including for corruption cases, if these are considered to infringe the law. No action has been taken to address recommendations from the European Commission since 2022, to restrict the use of the Prosecutor General's authority power to annul final investigatory and prosecutorial decisions. Furthermore, the National Crime Agency’s exclusive authority to investigate corruption and EU funds misappropriation was transferred to general police bodies. This has reduced the availability of specialised corruption investigators, potentially hindering efforts to address major complex cases effectively (Euractiv, 2025[16]; EPPO, 2023[17]).

An effective anti-corruption system requires robust coordination, as well as high levels of specialisation. This is particularly crucial to tackle complex, high-level corruption crimes. Such a system also needs to be underpinned by a transparent and carefully calibrated distribution of powers among the various anti-corruption actors, including investigators and prosecutors. This further emphasises the importance of recalibrating the Prosecutor General’s powers, as discussed above (European Commission, 2025[10]). No measure has been taken to provide sufficient guarantees of independence in relation to the dismissal of members of the Judicial Council, particularly those appointed either by the Government, the President of the Republic or the Parliament (ICJ, 2025[18]). For instance, following the 2023 elections, members of the Judicial Council appointed by the previous Government were dismissed and replaced before the end of their terms.

The Judicial Council plays an important role when it comes to decisions on the selection, appointment, disciplinary proceeding and prosecution of judges and in ensuring the rule of law. Safeguards should be introduced for judges prosecuted under the “abuse of law” provision, whose application can lead to potential misuse and undermine judges’ independence, by also creating an unnecessary administrative burden from processing such cases (OECD, 2024[9]).

The reform of the judicial map that started in 2023 has reorganised the courts system, introducing a new territorial arrangement of district and regional courts, with a separate administrative system, leading to improved court efficiency. However, there is still space for increasing the specialisation of judges (Vlex, 2023[19]). Moreover, the reform is still facing a shortage of specialised judges that the amendment to the Act on Courts in 2025 aims to address, by lowering the requirement from three to two specialised judges to form a workplace within the territorial jurisdiction of the district court (European Commission, 2025[10]; European Commission, 2025[20]).

Despite the judicial reform, the efficiency of administrative courts has deteriorated, likely in part due to the reorganisation introduced by the recent reform, which requires time to become fully operational. For example, the time to resolve administrative judicial cases increased significantly in 2023, to 1040 days from 648 in 2022, placing it among the highest in the EU (European Commission, 2025[10]). Moreover, the Slovak Republic lags other European countries in the promotion of and incentives for using alternative dispute resolution methods, which could help to improve judicial efficiency (European Commission, 2025[20]).

An intergovernmental consultation on the new National Anti-Corruption strategy 2024-2029 and the related Action Plan started in September 2025 and a final document is set to be approved. The proposed strategy focuses on strengthening the integrity of the public administration, with the action plan following a capacity building approach centred on education, corruption risk management and data-based monitoring (European Commission, 2025[10]). Concrete initiatives should be envisaged to reinforce lobbying regulation, conflict of interest rules and legislation on asset declaration. For example, rules to prevent conflict of interest remain insufficient.

As regards asset declaration, efforts should be made to standardise rules across public officials and introduce a digital submission system. Also, the government’s plan to limit access to asset declaration information, due to privacy issues, should be avoided to ensure more transparency in this area. This should be done by identifying the right balance between information freely available to the public and that for the restricted use of other public independent oversight institutions (OECD, 2011[21]). In the United States, for example, a multi-layered approach exists, requiring both confidential and public disclosures depending on the official’s level and function (e.g. executive, legislative, or judicial). Moreover, the system should be made more enforceable, with clear mechanisms for verification, adequate sanctions for non-compliance, and institutional capacity to monitor and follow up on declarations.

Broader rules on post-employment restrictions for high-level civil servants and their staff, including cooling-off periods after the end of their appointment, have been introduced in 2025 with the approval of the Code of Conduct for persons in high executive positions (Government of the Slovak Republic, 2025[22]). On the other hand, lobbying remains unregulated although a public consultation, also involving the European Commission, is underway (Ministry of Interior, 2025[23]). Efforts should be made to complete this process and ensure its successful implementation, to overcome the current legal shortcoming in this area and prevent failures as past proposals have yet to be enacted.

The new rules on public procurement adopted in 2024 may reduce competitiveness and weaken corruption prevention safeguards. For example, amendments to the public procurement law, alongside simplified rules for strategic public investments, resulted in the exclusion of approximately 50% of tenders from anti-corruption oversight and requirements. Furthermore, the creation of a government-appointed Vice-Director position, overseeing strategic public investments, has raised transparency concerns on potential direct political influence over strategic public investment decisions, which should be monitored (European Commission, 2025[10]). Action should be taken to align rules for strategic public investment with those for standard procurement to ensure an equivalent level of anti-corruption oversight. There is scope to improve the system’s efficiency, and transparency while speeding up tender processes, for instance through digitalisation. The time taken to decide between the offer deadline and contract award is among the longest in the European Union (European Commission, 2025[24]).

2.2.2. Cutting red tape to foster competition

The Slovak Republic has implemented reforms to improve product market regulation, such as the introduction of a centralised licence inventory and adopting the "once-only" principle for public bodies, meaning that information only needs to be provided to one authority, which is then shared with other relevant authorities. In the energy sector, retail price comparison tools have increased transparency (URSO, 2023[25]). Still, the Slovak Republic performs below the OECD average and top OECD performers in the 2023-24 Product Market Regulation indicators (Figure 2.7). Interaction with stakeholders, administrative requirements for starting new companies, involvement in services sectors operations and assessments of the impact on new regulation on competition are less conducive for competition. Implementing pro-competitive reforms and reducing barriers to entry and exit will raise productivity, boost competitiveness and foster innovation (Égert, 2016[26]). Well-functioning product markets support growth by incentivising new and innovative market entrants and prompting existing companies to improve.

Figure 2.7. There is scope for improving product market regulation
Copy link to Figure 2.7. There is scope for improving product market regulation

Product Market Regulation indicators scores, from 0 to 6, 2023 (lower values indicate more competition-friendly settings)

Establishing a personally owned enterprise (POE) is easy in the Slovak Republic compared with other OECD countries. Since 2023, prospective businesses can use a new procedure for establishing a limited liability company through a simplified online process. This is welcome, as easing the burden for starting an LLC can boost the entry of new companies, incentivise entrepreneurs to take risks, thus contributing to business dynamism and competition (Klapper, Laeven and Rajan, 2006[27]). In half of the 47 countries covered by the PMR, procedures to start an LLC can be done solely online. In Estonia, Finland, Greece and New Zealand, entrepreneurs must contact only two bodies when setting up a new LLC, one that handles most of the administrative issue, while social security-related procedures required when hiring employees must be completed separately. Allowing all procedures to be carried out online would reduce some of the burdens on prospective businesses (OECD, 2020[28]).

The administrative cost of starting an LLC is low compared with many other OECD countries (Figure 2.8, Panel A). However, the minimum paid-up capital required to start an LLC stands at 25% of annual GDP per capita, among the highest in the OECD (Figure 2.8, Panel B). High initial capital requirements may deter new entrepreneurs or companies wishing to scale-up their business yet lack the initial resources. For small companies that begin as unincorporated businesses, growth to a significant size is likely to involve incorporation (Li and Yueh, 2011[29]). One reason is that smaller companies may need to issue equity shares to raise sufficient capital to grow, with investors possibly attracted by the continuity that incorporation can provide. Another reason is that incorporation may provide investors with limited liability. Delays or prevention of the formation of potentially high-growth companies, especially where access to financing is limited (see the next section). Keeping the cost of forming an LLC low encourages entrepreneurship and may stimulate job creation and innovation (Cheng, Ding and Liu, 2024[30]). Conversely, high capital requirements might drive prospective entrepreneurs to incorporate in other jurisdictions (Gelter, 2024[31]).

Figure 2.8. The cost of starting a limited liability company is low, but required capital high
Copy link to Figure 2.8. The cost of starting a limited liability company is low, but required capital high

Several OECD countries have taken steps in recent years to reduce or eliminate the minimum capital requirements for establishing limited liability companies (LLCs), aiming to foster entrepreneurship and improve the ease of doing business. Notable examples include France, Spain and Finland that have all reduced the required capital to symbolic amounts. In Finland, the number of LLC’s nearly doubled after the minimum requirements were abolished in 2019 (Ruohonen et al., 2022[32]).

The Slovak Republic has more than 100 state-owned enterprises (SOEs), accounting for 3.1% of non-agricultural employment (OECD, 2017[33]). The SOEs are active in a range of sectors, notably utilities, finance, transport and healthcare. The governance of SOEs is less competition-friendly than among the OECD average and best performers. An explicitly expressed rationale for the state to own - or continue to own - companies does not exist. Clearly defined objectives would enable the state to determine whether continued ownership is justified or effectively assess performance and ensure accountability. More than two-thirds of OECD countries have published an explicit ownership rationale.

The Slovak Republic also lacks a comprehensive ownership policy that clarifies which public bodies exercise ownership rights in SOEs and that detail how these ownership rights should be exercised. Such a policy document could help to ensure transparency and to limit undue political involvement in SOE operations. The 2024 OECD Compendium on the Ownership and Governance of State‑Owned Enterprises points out Sweden and Norway as good models of a comprehensive and effective ownership policy of SOEs.

The governing bodies of SOEs play an important role in defining the company’s strategy, overseeing their management, and making important management decisions. To carry out these responsibilities effectively, they must be safeguarded from political interference. However, in the Slovak Republic, there is no explicit requirement that the boards of directors of SOEs include an appropriate number of independent members and that serving politicians cannot sit on them. This increases the risk that board decisions may be driven by political interests rather than the company’s performance objectives, creating conflicts of interest and generating competitive distortions in the relevant sectors. Furthermore, public authorities are involved in the choice of the CEOs, which again raises the risk of politically driven appointments. In roughly on third of OECD countries, only the board are responsible for the choice of CEO.

Moreover, there is no separation between SOE ownership and regulatory roles in the Slovak Republic, as line ministries exercise ownership rights in the SOEs that operate in the industry they regulate. To reduce the risk of possible conflicts of interest, the ownership functions for SOEs could be centralised in a single body with a clear mandate or coordinated by such a body. Centralising state ownership functions can ensure coherence in corporate governance practices in SOEs, pool management expertise, and avoid the risk that SOEs are subject to competing or contradictory objectives. For example, several OECD countries are reforming how they organise and exercise ownership of their SOEs. Nations such as Finland, Norway, Slovenia and Sweden already ensure that their SOEs adhere to good governance practices that are well aligned with OECD best practices that aim to achieve competitive neutrality.

Regulatory Impact Assessments (RIAs) have been part of regulatory governance since 2008, overseen by a committee of multiple ministries. While this structure promotes accountability, further strengthening oversight through a central body could improve consistency and rigour to give impact assessment greater prominence when informing cabinet decisions (ÚHP, 2023[34]). Similarly, while recent "anti-bureaucracy packages" have yielded administrative savings (OECD, 2025[35]), systematic ex post evaluations of regulations remain limited, and stakeholder consultations occur too late in the legislative process. Slovakia’s 2022 Unified Methodology introduced one-in, two-out rules and measures to reduce gold-plating in EU law transposition. These efforts should focus on regulatory quality rather than quantity, as in Sweden's Simplification Council (Tillväxtverket, 2024[36]). Digitalising the RIA process and introducing thresholds that require only light-touch assessments for low-impact proposals would ease administrative burdens.

2.2.3. Improving the tax system to encourage business expansion

The Slovak Republic has a sizeable share of its workers operating in companies with less than 10 employees and in large companies, in particular in the automotive sector. Between the two poles, there is a “missing middle” of SMEs with between 10 and 249 employees (OECD, 2021[37]). Small companies are often a source of growth, employment and innovation, yet it is key that business conditions are conducive to their growth and scaling up (Coad et al., 2014[38]).

The Slovak Republic boasts a high business start-up rate, yet the survival and growth rates of start-ups are relatively modest and small business productivity is low compared to regional peers and the EU average (Figure 2.9). The output per person of Slovak micro companies was roughly 80% of micro companies in the other Visegrád countries (and 40% of micro companies in the EU), and only one-quarter of Slovak start-ups were still operating five years after their creation, a relatively low rate (OECD, 2021[37]). Surveys show that Slovak’s are increasingly experiencing obstacles that hinder domestic business development, relating to political and legislative uncertainty, high tax rates as well as low skills among the workforce (AHK, 2025[39]; EIB, 2024[40]; Slovak Business Agency, 2023[41]).

The tax system should focus on optimising revenue collection with the least detrimental impact on growth possible. Chapter 1 in this Economic Survey outlines the recommended tax mix that is required to consolidate government finances over the short- and medium-term. This section focusses on how the incidence and composition of certain taxes act as a barrier to employment, investment and growth.

Figure 2.9. Barriers to growth and scale-up remain
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Labour productivity by company size class, value added per person employed, ratio, 2023

The share of self-employed workers in the Slovak Republic is 27%, significantly higher than in other EU countries (Figure 2.10, (Eurostat, 2024[42])). The large representation of micro companies is partly driven by advantageous taxes for the self-employed and weak enforcement of existing labour laws (ÚHP, 2024[43]). According to the Slovak Social Insurance Agency, the number of inaccurately registered self-employed persons (people who should be considered full-time workers) in the Slovak Republic has increased from 84,000 to almost 110,000 in the last ten years (NKU, 2023[44]). In 2025, the Slovak Republic took several measures to combat the practice of using fictitious independent workers. For example, the definition of dependent work in the Labour Code changed in January 2026 while fines for illegal employment conditions were increased, with a lower limit of EUR 4,000 imposed on companies who use fictitious dependent workers. In addition, the Ministry of Labour, Social Affairs and Family conducted communication campaigns on social networks and in the media, notably on the advantages of legal work and the disadvantages of illegal employment. The number of cases of fictious independent workers detected doubled compared to 2024.

Workers are incentivised to be self-employed and for companies to hire them in lieu of offering employment, even when work conducted resembles dependent employment. Although formally forbidden, the practice is widespread across different sectors, from ICT to industry and services, allowing companies to take advantage of lower costs and more flexible contractual terms. One reason for workers to accept these terms is that the net income can be significantly higher for self-employed than for employees for a given level of labour costs for the employer (ÚHP, 2024[43]). While workers retain a higher net income, they make lower health and social security contributions and will therefore enjoy lower social benefits. 78% of the self-employed pay minimum contributions to the Social Security Agency, at the level of the prevailing minimum wage, resulting in low old-age pensions. The practice is also set to the detriment of employment relationships and causes unequal treatment of employees. Equalization of taxes and contributions of the self-employed relative to dependent employees is warranted. A good practice is to shift the burden of proof of employment to the employer rather than the employee. Moreover, the labour inspectorate could increase its inspections among companies to ensure that self-employed are not taking up dependent employment.

Figure 2.10. The Slovak Republic has a very large share of self-employed people
Copy link to Figure 2.10. The Slovak Republic has a very large share of self-employed people

Share of persons employed in companies with zero employees (sole proprietors) in total number of persons employed, %, 2023

Moreover, a lump sum tax deduction for costs of self-employed persons is allowed for 60% of incomes, up to a ceiling of maximum 20,000 EUR. The tax deduction is accessible for all self-employed workers, irrespective of their actual costs. There is no requirement to present receipts or invoices for purchases to receive the deduction. The ceiling of the tax deduction was increased from EUR 5,040 to EUR 20,000 in 2017, further increasing the net-of-tax benefit of being self-employed rather than a full-time employee. Although there may be valid justifications for such deductions, it may create opportunities for tax evasion as private expenses can be mischaracterised as business expenses and incentivise dependent workers to choose to become self-employed (Remeta et al., 2015[45]). To ensure that the tax deduction is used by the self-employed, and not fictitious dependent workers, it could be made contingent on employer-employee-relationships to avoid abuse. This is the case of the Brazilian SIMEI, the Colombian Simple, the French Micro-tax and Micro-entrepreneur regimes, the Italian Flat-tax regime and the Mexican RESICO (Mas-Montserrat, 2024[46]). For example, the Italian flat-tax regime does not allow the self-employed to have as their main client a current or former employer. The French Micro-tax and Micro-entrepreneur regime includes a client-concentration regime whereby a self-employed person receiving more than 70% of their income from one employer is excluded from the regime (Mas-Montserrat, 2024[46]).

High marginal taxes on labour discourage work and can impede economic growth by elevating employment costs and diminishing incentives for both employers and employees. The marginal tax wedge measures the part of an increase in total labour costs that is due to income taxes and social security contributions paid by both parties, minus any family benefits received. Marginal tax wedges in the Slovak Republic are high across the wage distribution for people without children, but in particular for high and low-income earners (Figure 2.11, Panel A). This is primarily due to high social security contributions that contribute to more than one-third of total labour costs, among the highest in the OECD (OECD, 2025[47]). In 2023, the government increased the child tax credit and child allowances, lowering the tax wedge for families. From 2025, the child tax credit was made more targeted toward lower income households while lowering the age of entitlement of children from 25 years to 18. Nonetheless, the fiscal preference for families with children remains high compared to other OECD countries (OECD, 2025[47]).

Reducing the marginal labour tax wedge by lowering employer social security contributions can enhance employment incentives and stimulate economic activity, especially among innovative start-ups (Darnihamedani et al., 2018[48]). High labour tax wedges have particularly negative effects on long-term economic growth in the upper part of the income distribution (Akgun, Cournède and Fournier, 2017[49]). Lower marginal tax wedges, especially at the upper end of the wage distribution, can also help retain workers with higher earnings and reduce some of the pressing skills shortages. There is public support for lower taxes of labour. For example, 59% of Slovak respondents believe that taxes should be lowered, even if it comes to the detriment of some public services, the highest share among EU countries (European Commission, 2025[50]).

Statutory corporate income taxes (CITs) increased from 21% in 2024 to 24% in 2025 as part of the fiscal consolidation package. At the same time, the CIT for small companies (below EUR 100,000) was lowered to 10%, below that of the OECD average and down from 15% in 2024 (Figure 2.11, Panel B). Effective average and marginal CITs are also higher than regional peers. A lower tax rate for small companies increases their retained earnings and can result in higher investment, growth and productivity. However, imposing differential taxes based on the size of profits can also incentivise entrepreneurs to stay small and report earnings under the threshold of EUR 100,000, even if they have higher growth potential (Garicano, Lelarge and Van Reenen, 2016[51]; Hagemann, 2018[52]). 17 other OECD countries have preferential tax rates for small enterprises, and these schemes have generally had mixed results. For example, the United Kingdom abolished its preferential rate in 2015 and introduced instead more targeted measures such as support to cover financing gaps for start‑ups.

In April 2025, the Slovak government introduced a financial transactions tax (FTT) as part of the fiscal consolidation package. Several OECD countries such as Hungary, Ireland, France and Korea have various financial taxes that are either targeted at sales of stocks or securities, or payment services or transactions. The Slovak FTT is most like the tax introduced in Hungary in 2013. It is levied on non-financial corporate’s bank transactions - specifically, the FTT imposes a 0.4% tax on financial transactions, capped at EUR 40 per transaction, and a 0.8% tax on cash withdrawals without a cap, payable by the financial institutions. A business survey at the end of April revealed that companies see significant negative impacts of the tax on business operations, costs and changing behaviour overall (using more cash, reducing banking transactions and considering moving some part of the business abroad) (PAS, 2025[53]).

While fiscal consolidation efforts are warranted, FTT’s are highly distortionary and do not provide a reliable source of revenue over time (Baca-Campodónico, de Mello and Kirilenko, 2006[54]). By December 2025, the Slovak FTT had generated revenues of roughly EUR 339 million (or 0.25% of projected GDP in 2025) (Ministry of Finance, 2025[55]). FTT revenues have thus fallen short by around EUR 178 million compared with the EUR 517 million anticipated in the 2025 budget (Ministry of Finance, 2024[56]) and by 81 million compared to the updated Ministry of Finance projections of 420 million in August 2025. There are also evasion risks, as cash use may increase to avoid the tax, pushing more business into illegal behaviour. Higher cash use was for example seen in Hungary after the introduction of their FTT (Végső, 2020[57]). Abolishing the FTT, lowering the labour tax wedge by reducing social security contributions, as well as harmonising the CIT for companies of different sizes could be compensated by a broadening of the tax base. For example, by relying more on taxes on property, on environmental harmful activities and by removing VAT reductions (see Chapter 1).

Figure 2.11. Marginal tax wedges on labour are high and tax rates on capital uneven
Copy link to Figure 2.11. Marginal tax wedges on labour are high and tax rates on capital uneven

2.2.4. Easing entry restrictions in regulated professions and speeding-up insolvency procedures

The number of regulated professions is high in the Slovak Republic (OECD, 2025[58]). Several professions face markedly higher entry barriers than on average in the OECD (Figure 2.12). For notaries for example, the number of positions is determined by the Ministry of Justice and there are geographical limitations on where a notary can operate. While there may be valid reasons for regulating entry into professions where specific competencies are critical and malpractice can lead to significant harm, these barriers can unduly protect incumbents, stifle business dynamism, and impede aggregate productivity, entrepreneurial initiative and innovation. Several OECD countries have limitations on the number of notaries – yet the Netherlands does not set any limit on the number of practitioners and France has made the number of notarial offices dependent on an assessment of regional needs. In about 30% of OECD countries, notaries can operate in different subnational jurisdictions from the one in which their office is located. For lawyers in the Slovak Republic, provisions explicitly prohibit them from entering business partnerships or joint ventures with professionals from other fields. Only attorneys are permitted to hold ownership and voting rights. Such restrictions tend to make legal services more expensive, which can ultimately deter innovation, including for companies using legal services as input (Bambalaite, G and von Rueden, 2020[59]; OECD, 2024[60]). For civil engineers and architectural companies, similar rules apply. Most of the ownership and voting rights in civil engineering companies must be held by civil engineers and minority rights can only be held by other professionals (architects). The same applies to architectural companies. Limitations on ownership rights can affect the possibility of attracting investments. In addition, they limit the presence of non-professionals in a company, who could bring innovative ideas and managerial skills that can be important to complement the technical skills held by professionals.

Removing restrictions on ownership as in Australia, Ireland or the United Kingdom could facilitate innovation. Moreover, there is only one official pathway to enter civil engineer and architect professions. Non-EU citizens are not permitted to enter these professions in the Slovak Republic, while EU citizens may do so only after passing a local qualification exam. Barring non-EU professionals and imposing additional requirements on EU citizens restricts cross-border mobility and limits the pool of qualified professionals. This weakens competition and can slow the diffusion of new practices into the market. Overall, reducing barriers to market entry can stimulate new business models and innovative practices, and boost access to managerial skills and investment sources.

Figure 2.12. Barriers are high in some services professions
Copy link to Figure 2.12. Barriers are high in some services professions

Product Market Regulation indicator scores, from 0 to 6 (most restrictive), 2023

Efficient insolvency frameworks that allow failing companies to exit the market are also important to enhance competition. Facilitating exit can improve resource reallocation and boost productivity. The Slovak Republic has made significant progress in improving its insolvency regime, and business churn, defined as the sum of entry and exit rates, are higher than the EU average (Figure 2.13). The Slovak Republic transposed the EU Directive on preventive restructuring frameworks in 2022, strengthened early warning mechanisms and streamlined insolvency processes through digitalisation. Yet further progress can be made, as noted in the previous Economic Survey. The number of stages in which the court is involved in the liquidation and restructuring process remains higher than in other OECD countries (André and Demmou, 2022[61]). The duration of administrative court procedures is long compared to other EU countries (European Commission, 2024[62]). This suggests space for more out-of-court proceedings that can speed up and lower the costs of restructurings and liquidations.

Figure 2.13. Business churn is higher than the EU average
Copy link to Figure 2.13. Business churn is higher than the EU average

Churn rate, share of enterprise births/deaths in active enterprises, %, 2023

2.2.5. Attracting FDI inflows and simplifying trade

The Slovak Republic benefited from rapid inflows of FDI in the 2000s. The large inflows of FDI in the 2000s is reflected in a sharp increase in the share of value added of foreign multinationals in the Slovak economy, especially in the automotive industry (Figure 2.14). In the automotive sector, MNEs contributed 97% of the value added over the 2011-2020 period. The shares are also markedly higher in other sectors than the OECD average and the average of the Visegrád countries. Foreign MNEs trade significantly more internationally and are typically more productive than domestic companies (Caves, 1974[63]; Haskel, Pereira and Slaughter, 2007[64]). Foreign-owned companies in the Slovak Republic contribute, in value terms, to roughly four-fifths of exports and more than two-thirds of imports. Moreover, companies that begin to supply a foreign MNE often increase their productivity due to learning and technology spillovers (Gorodnichenko, Svejnar and Terrell, 2014[65]; Amiti et al., 2024[66]).

Formal restrictions on FDI are low compared to other OECD countries (OECD, 2024[15]), although some FDI screening was introduced in 2023 for a set of critical services sectors, such as telecommunications, broadcasting, commercial banking, and rail and road freight transport services. A 2025 survey of foreign companies active in the Slovak Republic shows reduced confidence in the Slovak economy as compared with other Eastern European economies. Companies had a negative view of the country’s higher -- and increasing – labour and corporate taxes, including social security contributions. The surveyed companies also expressed growing dissatisfaction with public procurement transparency and anti-corruption measures, all of which received worse ratings than the year before (AHK, 2025[39]). Better framework conditions, including lower corruption, can help reduce uncertainty and raise the Slovak Republic’s attractiveness as a destination for FDI.

Cumbersome regulations and difficult border procedures can impede goods trade and raise import costs, reducing competitiveness and the functioning of supply chains. To address such obstacles globally, the World Trade Organisation (WTO) introduced a Trade Facilitation Agreement (TFA) in 2013 that came in force in 2017. The OECD’s Trade Facilitation Indicator (TFI) captures countries’ progress on the TFA and its implementation. Between 2012-2024, the Slovak Republic improved the value of its TFI by on average 0.1 index points (on a scale of 0 to 2) per new release, yet scores remain below the OECD average. Several documents are required, while appeals procedures are more cumbersome than the OECD average (Figure 2.15, Panels A and B). Improving the TFI further towards that of the OECD average could reduce distance-related trade costs by 13% (OECD, 2025[67]; Frohm, Forthcoming[68]).

Figure 2.14. The share of value added of foreign MNEs is very high in the automotive industry
Copy link to Figure 2.14. The share of value added of foreign MNEs is very high in the automotive industry

Share of foreign multinational value added in total value added, %, 2011-2020

Simplifying and accelerating customs clearance of goods, by further digitalising processes, can help lower costs for companies and thereby make the Slovak Republic an even more attractive destination for trade and production. Increasing information availability relating to pre-arrival processing of imports would help ease cross-border trade, including for the automotive industry. Access to import/export requirements and the relevant administrative forms from a distance, without the need to physically visit government agencies’ offices, reduces the time and cost of obtaining information. Although small and large companies generally benefit from improvements in the overall trade facilitation environment, SMEs typically benefit more (López González and Sorescu, 2019[69]). Improving trade facilitation can thus help smaller companies internationalise further, grow and enable them to diversify supply chains.

Services trade in the Slovak Republic is less restrictive compared to the average OECD country, as indicated by the OECD Services Trade Restrictiveness Index (STRI), with modest progress observed over the past decade. The most significant constraint lies in barriers to foreign market entry, affecting all sectors. Trade restrictions also apply towards other EU countries and members of the European Economic Area (EEA), as reflected in the intra-EEA STRI (Figure 2.15 Panel C). New entrants or their potential entry can heighten competitive pressures and strengthen productivity in relevant markets.

While the short-term impact on trade from liberalising services may be modest, the long-term effects are typically substantial (Benz et al., 2023[70]). Services also serve as inputs in other sectors like automotive manufacturing, thereby playing a pivotal role in coordinating the flow of goods, capital, and knowledge across different locations. Reducing trade costs in the services sector can thus spill over to other parts of the supply chain and enhance efficiency across manufacturing sectors (Benz and Jaax, 2020[71]).

Figure 2.15. Barriers to trade can be reduced
Copy link to Figure 2.15. Barriers to trade can be reduced

The Slovak Republic could draw lessons from several OECD members that have implemented specific visa schemes for contractual services suppliers and independent professionals to liberalise services trade. Extending the duration of stay for all service providers and issuing work permits for spouses would enhance the attractiveness of the market for foreign service providers. Companies in the Slovak Republic are also facing services trade barriers from other countries in the EEA (for example restrictions on foreign entry, barriers to competition and movements of people). Lower services trade restrictions among other EEA countries overall could raise productivity growth in the Slovak Republic by two percentage points on average across service sectors and 0.7 percentage points per annum for the whole economy (see Box 2.3).

Box 2.3. Estimated productivity gains from lowering EU trade barriers in services

Copy link to Box 2.3. Estimated productivity gains from lowering EU trade barriers in services

Further integration of the EU internal services markets could deliver sizeable productivity benefits for the Slovak Republic. Using sector-level estimates in (Frohm and Quaglietti, Forthcoming[72]), this box estimates the productivity gains. The results are derived from panel regressions for 25 EEA countries and 12 services sectors with data from OECD’s STructural Analysis database (STAN) and the intra-EEA Services Trade Restrictiveness Index database (intra-EEA STRI).

A two-standard-deviation decrease in the intra-EEA Services Trade Restrictiveness Index (STRI) among EEA trading partners is estimated to increase Slovak services labour productivity growth per annum by two percentage points on average across sectors (Figure 2.16, Panel A). The estimated gains are concentrated in sectors that are highly tradable and where changes to the intra-EEA STRI are large. The gains range from 0.2 percentage points in construction to 5 percentage points in the telecommunications sector. Estimated impacts are also large in wholesale and retail trade (3.6 percentage points) as well as in warehousing and transport services (3 percentage points).

An illustrative quantification and aggregation of these effects suggest sizable gains in total labour productivity growth from lower services trade barriers in the EU. Using each sector’s share in real value added and aggregating the impacts suggest an increase in annual labour productivity growth by close to 0.7 percentage points for the whole economy. Retail and wholesale trade provides most of the uplift. Transport-related services such as land transport and telecommunications would also contribute to sizeable increases in aggregate productivity growth (Figure 2.16, Panel B). More determined progress towards a single EU market for services, as modelled for all EU members converging to the least-restrictive intra-EEA STRI level observed in 2023, could substantially magnify these gains, reaching 4.5 percentage points for the whole Slovak economy, with especially strong improvements in wholesale and retail trade, professional and technical services, land transport and ICT services.

Figure 2.16. Estimates of the increase in Slovak annual productivity growth
Copy link to Figure 2.16. Estimates of the increase in Slovak annual productivity growth

Impact of a two-standard-deviation decrease in the intra-EEA Services Trade Restrictiveness Index (STRI) among EEA trading partners, percentage points per annum.

2.3. Strengthening public and private investment

Copy link to 2.3. Strengthening public and private investment

Sustained investments are essential to enhance competitiveness, diversify the economy and lay the foundations for stronger productivity growth by allowing companies and sectors to perform higher value-added tasks (OECD, 2025[73]). In the Slovak Republic, both the public and private investment rate are below the averages for the OECD and the rest of the Visegrád group (Figure 2.17, Panel A). Low innovative activity is illustrated by poor scores on the European Commission’s European Innovation Scoreboard (Figure 2.17, Panel B), that have only seen small improvements in recent years.

Figure 2.17. Public and private investment are low
Copy link to Figure 2.17. Public and private investment are low

As a result of persistently low investment growth (see Box 2.4), capital deepening has made one of the weakest contributions to potential output growth among OECD countries in recent years (Figure 2.1, Panel A). Changes in the sectoral composition of the economy – notably, a rising share of less investment-intensive services and a declining share of capital-intensive manufacturing – appear to have had only a limited impact on net investment (i.e. investment after accounting for depreciation). Instead, the decline in investment is driven primarily by within-sector dynamics (Figure 2.1, Panel B).

Box 2.4. Cyclical and structural trends in investment

Copy link to Box 2.4. Cyclical and structural trends in investment

Investment growth has slowed relative to trends that prevailed in the 2000s (Figure 2.18). The slowdown largely reflects the enduring impact of two major shocks – the global financial crisis (GFC) and the COVID-19 pandemic – both of which led to substantial declines in real investment as economic growth weakened and financing conditions tightened. More recently, Russia’s war of aggression against Ukraine and elevated energy prices have further weighed on capital formation.

To assess to which extent the weakness in non-housing investment reflects cyclical factors or more structural impediments, a simple accelerator model can be employed. This approach relates non-housing investment to GDP, positing that capital formation is roughly proportionate to changes in output. In this framework, stronger economic growth should prompt companies and governments to increase investment to expand productive capacity. For the Slovak Republic, the model suggests that subdued aggregate demand accounts for more than one third of the weakness in gross fixed capital formation relative to the 2000-2008 trend (Figure 2.18).

The remaining shortfall may be viewed as an investment ‘gap’, defined as the shortfall in investment not attributable to output developments. This gap is 29% in the Slovak Republic, a shortfall that is larger than in most other OECD countries (OECD, 2025[73]). While several key investment determinants such as the relative price of capital, real interest rates and corporate valuations have become more favourable, they have not been sufficient to offset the broader decline in investment relative to predicted values (OECD, 2025[73]).

Figure 2.18. Real investment is lower than implied by changes in GDP
Copy link to Figure 2.18. Real investment is lower than implied by changes in GDP

Real gross fixed capital formation, EUR billion

Strengthening the enabling environment for entrepreneurship and innovation, as discussed in the previous section, remains critical. Moreover, policies that incentivise private R&D expenditure, including among SMEs, and increase the use of digital technologies, could foster diversification, innovation and support knowledge spillovers, including in the automotive sector. Improving the efficiency of public spending and accelerating the absorption of EU funds would help scale up investment in both conventional and digital infrastructure.

Figure 2.19. Low capital formation has led to low growth
Copy link to Figure 2.19. Low capital formation has led to low growth

2.3.1. Incentivising more innovation

Total research and development (R&D) expenditure in the Slovak Republic remains significantly below the OECD average and the levels observed in other Visegrád countries (Figure 2.20). This underperformance is largely attributable to low spending by the business sector, higher education institutions, and the non-profit sector. In contrast, public sector expenditure on R&D is broadly in line with OECD and regional peers. R&D expenditure plays a vital role in fostering long-term economic growth (Romer, 1990[74]). Economies that maintain sustained R&D investment tend to experience faster technological progress, higher value-added output, and greater resilience. Several measures and financial schemes are directed toward raising R&D investment. They are currently being implemented or are part of national strategies, such as the Action Plan to the National R&I Strategy for 2026–2028. An example is the completed call from the OP Slovakia programme, “Strategic Research and Development through Partnerships,” with a total allocation of more than EUR 112 million, aimed at increasing R&D capacities in enterprises and supporting cross-sectoral cooperation with the academic sphere. The overall strategic objective is for the volume of private R&D expenditures to reach 1.2% of GDP by 2030.

Investments in intangible assets and R&D are often hindered by market imperfections, including uncertain returns, non-rivalry and high synergies, creating information asymmetries and reducing their value as collateral. These factors complicate financing, particularly for young and small companies. As a result, investment in R&D frequently falls below optimal levels across much of the corporate sector. Slovak companies continue to rely heavily on traditional financing sources such as retained earnings, personal savings, bank loans and overdrafts. At the same time, most companies generally do not report financing constraints as a major obstacle to investment and the share of respondents reporting such constraints has fallen to historical lows in the Slovak Republic. For instance, almost no medium or large enterprises identify themselves as financially constrained, while only 13.3% of micro and small companies report such constraints, typically due to rejected applications for external finance (EIB, 2024[40]).

Alternative sources of early-stage finance, including venture capital, remain underdeveloped, although some progress has been made in recent years (Figure 2.21, Panel A). Well-functioning business angel networks can play a crucial role in supporting start-ups by pooling investment risks and matching viable projects with equity finance. The Slovak Business Angel Network, established in 2011 by the Young Entrepreneurs Association of Slovakia, the Slovak Venture Capital and Private Equity Association, and the Slovak Business Agency, aimed to address this gap. It offered matchmaking services, pre-screened projects, and created networking opportunities. However, its activities have stalled since 2021.

Reactivating and strengthening the business angel network could be a cost-effective and non-distortionary means of supporting early-stage equity markets. Targeted logistical and financial support such as administrative assistance, co-financing of operational costs, or capacity-building for investors could help improve matching finance supply and demand in the Slovak start-up ecosystem. For example, the Seed Enterprise Investment Scheme (SEIS) in the United Kingdom is an investment incentive initiative designed to stimulate equity investments in new enterprises with growth potential (see Box 2.5).

Moreover, harmonising EU securities market regulation and making equity markets more efficient would leverage economies of scale, including by fostering consolidation of exchanges. Deepening integration of the EU capital market would remove barriers and unlock the full potential of the EU single market for financial services and improve financing options within the EU (OECD, 2025[58]). Simplified access to capital markets reduces costs, increases the availability of finance and makes markets more appealing for investors and companies across all Member States, irrespective of size.

Figure 2.20. R&D expenditures are low
Copy link to Figure 2.20. R&D expenditures are low

Gross domestic expenditure on R&D by sector of performance, as % of GDP, 2023 or latest available year

Targeted public support also can play a role in addressing market imperfections that hinder investment in intangible assets, particularly R&D, among small and young companies. While the Slovak Republic offers relatively generous marginal R&D tax subsidy rates (Figure 2.21, Panel C), overall government support for business R&D remains low by international standards (Figure 2.21, Panel B). The R&D tax allowance (the “super-deduction”) allows for a 100% deduction of R&D costs, with unused amounts carried forward for up to five years. However, cash refunds may be more effective for young companies with limited taxable income but immediate financing needs during early stages of innovation. Indeed, the largest share of the super-deduction is claimed by large enterprises, many of which are foreign owned (Ministry of Finance, 2023[75]).

A 2024 Slovak study shows that expanding tax-deductions to smaller loss-making companies, with limits of EUR 20,000-50,000, could increase R&D spending also by SMEs (Vel’ky, Bukovina and Tóth, 2024[76]). International examples of refundable R&D tax credits targeted at SMEs include Australia, Canada, Colombia, and the United States. In the United States for example, entities with gross receipts of less than USD 5 million - a qualified small business - may apply a portion of its research credit up to USD 500,000 for taxable years beginning after 2022 — against its payroll tax liability, instead of its income tax liability (OECD, 2024[77]).

Box 2.5. Seed Enterprise Investment Scheme in the United Kingdom

Copy link to Box 2.5. Seed Enterprise Investment Scheme in the United Kingdom

The Seed Enterprise Investment Scheme (SEIS) is an investment incentive initiative designed to boost economic growth in the United Kingdom by stimulating equity investments in new enterprises with growth potential. It also includes a platform linking start-ups and (potential) investors, allowing new firms to promote their company to potential investors and offering investors a convenient way to search for investee companies.

Besides its start-up and investor matching potential, SEIS supports investments through tax incentives. The scheme provides investors with an upfront tax credit for investments in young companies, a capital gains tax deferral for reinvestment, a capital gains tax exemption for chargeable gains realised on disposal, and loss relief on more favourable terms than the baseline tax system for capital losses realised on disposal. Targeting entrepreneurial firms, SEIS combines age, size and specific sector exclusions.

Given the limited size of the early-stage investments and underdeveloped business angel investor community in the Slovak Republic, the government could encourage the establishing of a platform where companies could obtain visibility, and potential investors could browse project proposals. To motivate equity investors, restrictions and procedures should be straightforward and proportionate.

Source: (OECD, 2021[37]).

R&D tax incentives can be effectively complemented by direct public support for innovation. Competitive grant schemes tend to encourage early-stage basic and applied research and are especially valuable for high-risk, high-impact projects (OECD, 2020[78]). The Slovak Republic operates several competitive R&D grant programmes, which have generally proven to be effective and could be scaled up to further stimulate business innovation.

To avoid possible conflicts of interest and ensure fair allocation of funds, it is important that the process for extending innovation support is aligned with existing frameworks, such as VAIA’s Binding Methodology for the Management, Funding and Evaluation of Research, Development and Innovation Support (VAIA, 2023[79]). The Methodology sets out core principles to provide clear and transparent information, as well as ways to reduce the administrative burden and control functions to raise quality and impartiality with respect to applicants. One key mechanism is the use of foreign evaluators for grant applications over EUR 200,000, or where the funding accounts for more than 50% of eligible costs. Broadening the use of foreign evaluators for R&D applications across government authorities would increase transparency and impartiality, thereby reducing uncertainty and helping ensure that grants are allocated to their best uses (OECD, 2021[80]).

Figure 2.21. Uptake of capital and R&D support is limited while tax incentives are generous
Copy link to Figure 2.21. Uptake of capital and R&D support is limited while tax incentives are generous

2.3.2. Unleashing the benefits of the digital economy

Compared to the EU and other Visegrád countries, the expansion of high-speed internet infrastructure has stalled, with internet take-up among households being stable in the last three years, a comparably lower share of subscriptions to high-speed fixed broadband and low coverage of 5G (Figure 2.22). Investing more in high-speed internet infrastructure would encourage the acquisition of digital skills among households and allow companies to transform business models and perform higher value-added tasks.

The Slovak Republic has undertaken a series of strategic initiatives to advance its digital transformation. For example, the Digital Transformation Strategy 2030, the Digital Economy and Society Index (DESI) Improvement Strategy 2025, and the Action Plan for 2023–2026, are all aligned with the EU’s Digital Decade targets and aim to enhance the country’s digital infrastructure, boost digital skills across the population, support innovation and digital technologies and modernize public administration through e-government services. Since 2018, the Slovak Republic has progressed significantly on the OECD’s Product Market Regulation for digital services, improving de-jure conditions (OECD, 2024[81]).

Despite the government's commitment, progress towards better digital infrastructure and uptake has been moderate so far. Investment in ICT equipment and computer software and databases continued to lag other OECD and peer countries (Figure 2.23, Panel A). The coverage of very high-capacity networks (VHCN) and 5G in rural regions remains low (OECD, 2025[82]), and although efforts to build digital skills are ongoing, the Slovak Republic has not yet reached the goal of 80% of the population possessing at least basic digital competencies that are necessary in industries ranging from automotive to services. Similarly, while some businesses are beginning to adopt AI, big data and cloud solutions, overall uptake remains below EU averages (Figure 2.23, Panel B). The digitisation of public services continues to lag as well, contributing to the Slovak Republic’s consistently low ranking in the European Commission’s DESI. Underestimated project preparation resulting in long procurement times and inadequately priced IT solutions remain a hindrance. Similarly, scores are low on the OECD’s AI Observatory Index, measuring AI-ecosystems, and the use of AI remains limited (see Chapter 2 of this Economic Survey).

To accelerate the digital transformation, the Slovak Republic should further promote ICT adoption across households, businesses, and all levels of government. For example, establishing a dedicated ICT-focused Centralised Purchasing Body would enhance efficiency, reduce costs, and support the rollout of interoperable digital solutions (OECD, 2022[83]). Strengthening joint public procurement can drive more consistent and effective digitalisation nationwide.

Figure 2.22. Digital infrastructure is lagging
Copy link to Figure 2.22. Digital infrastructure is lagging

Digital use among the private sector would be facilitated by removing bureaucratic obstacles to scaling up investment in digital infrastructure. A new construction law, which took effect in April 2025, aims to streamline construction procedures which could aid digital infrastructure projects. Yet, stakeholders have expressed concerns about the potential for increased administrative burdens and fees associated digital infrastructure projects in municipalities and new reporting obligations for network providers. For example, the law is expected to complicate the provisioning of customer connections, and in some cases approval processes for new underground lines (European Commission, 2025[84]). Ensuring that administrative burdens are low and do not unduly delay projects is key to expand the digital infrastructure.

Digital uptake among SMEs could also be enhanced through targeted training combined with subsidies. A pilot project implemented with the World Bank and DG-REGIO of the European Commission in 2024 aimed to support micro- and small enterprises with pre-basic and basic levels of digital intensity through technical assistance. In addition, a reimbursement of up to EUR 2,000 was given for the purchase of digital tools. Integrating advisory support alongside targeted subsidies enabled SMEs to adopt digital technologies more effectively and sustainably than through a subsidy alone (Ministry of Investments and Regional Development, 2025[85]).

Figure 2.23. Investment in ICT and use of digital technologies are low
Copy link to Figure 2.23. Investment in ICT and use of digital technologies are low

2.3.3. Improving the efficacy of public investment

The Slovak Republic appears to underprovide public investment in key areas that would support long-term growth and enhancing competitiveness such as healthcare, education and infrastructure as noted in previous OECD Economic Surveys (OECD, 2022[86]; OECD, 2024[9]). High-quality infrastructure is also instrumental in attracting foreign direct investment (FDI), which has been essential in driving growth in the 2000s. Yet, 65% of Slovak companies consider the country’s infrastructure to be inadequate - well above the EU average of 39% (Eurobarometer, 2024[12]). A relatively high proportion of respondents express dissatisfaction with transport and digital infrastructure. Moreover, data envelopment analysis (DEA) comparing public investment inputs to outputs, such as road network length, wastewater connectivity, hospital bed capacity and energy production, suggests that there is considerable scope to improve the efficiency of public investment (OECD, 2024[9]).

As the Slovak Republic embarks on a process of fiscal consolidation, the availability of significant EU funds presents an opportunity to sustain public investment while adhering to broader expenditure restraint. Between 2025 and 2027, the Slovak Republic will have access to EU cohesion policy and Recovery and Resilience Facility (RRF) funding amounting to approximately 12% of 2024 GDP - providing substantial scope to finance priority investments. However, absorption rates have historically been low (Figure 2.24). During the 2014–2020 and early 2021–2027 programming periods, the Slovak Republic lagged both the Visegrád region and the EU average in utilising EU funds, with a sharp acceleration in spending towards the end of the programming cycle. Such backloading of disbursements often results in higher implementation costs and reduced competition, as fewer contractors can respond to tender calls on short notice, particularly in construction and infrastructure projects.

Inadequate preparation of investment project and weak connection between investment plans and the budget process continues to constrain effective absorption of EU funding. Several reforms have been introduced in recent years to improve absorption capacity, efficiency and strengthen project planning across government. A cornerstone has been the “Value for Money” initiative, launched in 2016, which mandated economic assessments for large-scale projects and required feasibility studies at early planning stages and the establishment of the Investment Authority within the Ministry of Finance, as well as the legal codification of investment rules in 2020. A National Investment Plan to 2035, including a strategic outlook to 2050, is currently being prepared to remedy longstanding weaknesses in strategic planning and investment coordination. Repeated assessments by the Supreme Audit Office, have highlighted fragmentation and lack of coordination in investment planning, as well as the need for a prioritised list of major projects. The European Commission’s 2025 Country-Specific Recommendations (European Commission, 2025[87]) underline that the Slovak Republic’s competitiveness is held back by a fragmented public administration, low transparency in procurement, and weak investment planning. The new Investment Plan aims to respond to these challenges by establishing a broadly supported national investment strategy through to 2050 and ensuring its timely and effective implementation. Developing a strategic national plan to address low EU fund absorption is a welcome step. However, implementation and continuous monitoring will be key to improve procurement processes and execute investment plans. As recommended in previous Surveys, strengthening project preparation and implementation capacity across line ministries and subnational governments, through targeted training and technical support, should be prioritised.

Figure 2.24. Absorption of EU funds is low
Copy link to Figure 2.24. Absorption of EU funds is low

Fraction of European funds spent at year-end under the last two Multiannual Financial Frameworks, %

Recommendation in previous Surveys	Action taken since 2024
Ensure the central appraisal of large transport infrastructure projects by the investment authority at an early preparation stage.	No action taken.
Strengthen project preparation and implementation capacity at line ministries and lower levels of government via targeted training.	No action taken.
Monitor project implementation and systematically assess projects ex- post.	No action taken.
Expand the use of quality-related and lifecycle cost criteria in public procurement.	No action taken.

2.4. Tackling pressing skills shortages

Copy link to 2.4. Tackling pressing skills shortages

The Slovak labour market is strong in many respects, although unemployment has risen slightly in 2025 as the economy weakened. The employment rate is relatively high, and the unemployment rate remains close to historical lows. As a result, effective job security is high. Only a very small minority of the working-age population live in relative poverty. The gender labour income gap is low (Figure 2.25).

Figure 2.25. The Slovak labour market is generally strong
Copy link to Figure 2.25. The Slovak labour market is generally strong

Dashboard of the labour market according to the OECD Jobs Strategy

Yet, labour and skills shortages have progressively become a stronger hindrance to growth (Figure 2.26, Panels A and B), and the most severe shortages are in the industrial and automotive sectors (Filippucci, Laengle and Marcolin, 2025[88]). An inadequately skilled workforce is a particularly prevalent problem for businesses (Figure 2.26, Panel C) with lack of skilled staff a pressing obstacle for investment (Figure 2.26, Panel D). More than half of Slovak companies in the PIAAC Employer Module acknowledged some degree of skills gap, the highest share among the countries investigated (OECD, 2024[89]). Employers often experience shortages of competencies such as technical/job-specific skills, customer handling, problem solving, teamwork and communication (OECD, 2024[89]).

The recovery from the COVID-19 pandemic exacerbated existing shortages due to the sharp rebound in economic activity that was combined with temporarily weakened labour supply, partly driven by the withdrawal of older workers from the labour market. Structurally, labour shortages are amplified by demographic changes like population ageing and technological shifts such as the rise of artificial intelligence (AI) and the green transition.

Figure 2.26. Skills shortages are a key barrier to growth and investment
Copy link to Figure 2.26. Skills shortages are a key barrier to growth and investment

Addressing the structural component of skills shortages is essential to boost investment, facilitate innovation and ensure that knowledge can spillover to the domestic economy from foreign-owned enterprises. Improving the education system, facilitating life-long learning, and increasing the use of active labour market policies that focus on re-training and upskilling, as well as increasing migration – including the return of skilled Slovaks living abroad – would all help reduce skills shortages and strengthen growth.

2.4.1. Improving children’s education

Slovak students at 15 years of age performed worse than the OECD average in all subjects of the OECD’s Programme for International Student Assessment (PISA), with trend declines in the scores on math, reading and science (Figure 2.27). Moreover, a smaller share of the students passes the minimum-proficiency level (Level 2 or above) in the three subjects than the OECD average. The share of top-performing students (with top performance defined with a common threshold across covered countries) was below the OECD average (OECD, 2023[91]). The education system is also characterised by strong inequalities. Pupils with weaker socio-economic background perform worse than their more advantaged peers and the difference between the top and bottom quartile is the largest in the OECD. In response to the falling PISA results, the Ministry of Education, Research, Development, and Youth of the Slovak Republic has launched a new curriculum reform in 2023, with legislative changes across all levels of education entering into force in 2026.

Figure 2.27. PISA scores are below OECD averages and peer countries
Copy link to Figure 2.27. PISA scores are below OECD averages and peer countries

Socioeconomically disadvantaged students perform particularly poorly (OECD, 2023[92]). Boosting education outcomes requires raising the performance of all students and especially for the weakest ones, by strengthening the quality of teaching and improving the efficiency of the school network. Recent research suggests that education reforms in the Slovak Republic could raise productivity by 2.4%, compared to 1.8% in the OECD average (Andrews, Égert and de la Maisonneuve, 2024[93]). Closing the skills gap to the top three OECD performers could yield even higher labour productivity gains (Andrews, Égert and de la Maisonneuve, 2025[94]).

The variation in test scores between children within schools is below the OECD average, while the variation between schools is among the highest in the OECD (OECD (2023[91]) and Figure 2.28). According to the interim and final reports on Spending Review of Primary and Secondary Schools, students in smaller primary schools, which are more common in rural areas, systematically achieve lower results in national assessments after controlling for socio-economic background and other factors (ÚHP, 2024[95]; ÚHP, 2025[96]). Students from disadvantaged socioeconomic backgrounds are more often clustered in certain schools than on average in the OECD (OECD, 2023[91]). The Roma, about 8% of the population, have poor educational outcomes (Bednarik, Hidas and Machlica, 2019[97]) and more than 60% of Roma children attended schools where all or most pupils were Roma (FRA, 2022[98]).

Figure 2.28. Test scores vary significantly across schools
Copy link to Figure 2.28. Test scores vary significantly across schools

*Variation in mathematics performance between and within schools, as a percentage of the average total variation in mathematics performance, 2022*

Early tracking and grouping students by their ability leads to lower academic performing students in mathematics being placed in similar schools (OECD, 2023[92]). This indicates that not all schools receive adequate support to fulfil the needs of all students. While the inclusion of learners with special needs into the mainstream schools has been improving in the Slovak Republic over the recent years, the education system does not seem to adequately support their diverse needs. Approximately 600 schools have fewer students than the legally required minimum number of children when establishing a school, and many of them are located near another primary school with free capacity (ÚHP, 2024[95]). While smaller schools in rural areas improve the availability of education, they are more expensive than larger ones. Furthermore, they lag in quality as their students have worse results in Slovak national tests even after considering the socioeconomic environment. The problems of small schools also include demanding management and fewer professionally taught hours. To remedy this, the Ministry of Education, Research, Development, and Youth of the Slovak Republic has adopted a series of legislative changes incentivising the creation of school clusters and other forms of intensive cooperation by small schools, while also launching an initiative to reshape the elementary school network.

In addition, too many students from disadvantaged backgrounds are enrolled in special needs schools. The number of pupils in special education is nearly four times higher than the EU average, with around half of these students from families receiving material needs assistance or from marginalised Roma communities. Since 2024, a specialised national project aimed at reintroducing learners with special needs into mainstream schools has been deployed by the Ministry of Education, Research, Development, and Youth of the Slovak Republic. For example, a new legislative reform addresses some of these disparities through creating new rules for school districts, including the mandating of one state school per school district and one district per address, and an effort to introduce private and church schools into the public school district (on a voluntary basis). The authorities are actively supporting the joining of smaller schools into larger units including through mergers or the creation of school clusters (where the schools retain their independence but may share certain personnel or services). These changes are expected to improve both availability and quality of service across the board. Facilitating larger schools and the merger of resources is welcome and should be continued. For example, the Ministry of Education, Research, Development, and Youth of the Slovak Republic has launched the national project Support for Educational Opportunities, addressing the issue of the disproportionately high representation of pupils from marginalized communities and socially disadvantaged backgrounds in special education (European Commission, 2025[99]). The goal is to move students into mainstream education through a newly developed system of adaptation classes and the provision of adequate support. Ensuring smooth and rapid implementation of these changes, followed by evaluation, would help ensure equal access to quality education for all pupils.

High-quality teaching is critical for improving education. Yet, many factors hinder the Slovak Republic’s capacity to attract and retain high-quality teachers in the education system. Only 6% of teachers believe that teaching is a profession valued by society, among the lowest among TALIS participating countries (OECD, 2025[100]).

Teacher salaries were increased in 2025 and 2026. Funding was introduced for supplementary qualification programmes in subjects experiencing teacher shortages alongside a new communication campaign to promote teacher education programmes. Higher pay can help attract and retain good teachers. At the same time, complementing salaries and total compensation with other measures like training and improving the work environment can also make the profession more attractive.

To strengthen continuing teacher training, 40 regional centres were created between 2022 and 2024 to provide mentoring expert advice and consultancy services to help teachers with the transition to a new curriculum. Moreover, initiatives have been launched to improve initial teacher training. The new law on higher education strengthens practical training of future teachers by introducing the concept of faculty schools and mandating minimum length of practical training in teaching study programs. The Ministry of Education, Research, Development, and Youth of the Slovak Republic also launched a new campaign aimed at high school students called “Become a legend among teachers” to increase attractiveness of teaching study programs. To specifically address shortages of STEM teachers, funded training for existing teachers to expand their qualifications in additional subjects (mathematics, physics, chemistry and ICT) has been introduced. This is welcome and progress in providing training should continue to be monitored and evaluated.

2.4.2. Ensuring that VET programmes are adaptable

Vocational Education and Training (VET) play an important role in the Slovak education system. The share of 25–34-year-olds with upper-secondary VET education is the highest in the OECD. In 2015, the government introduced a dual VET model to increase opportunities for work-based learning among students aged 15-18 years old and to alleviate skills shortages in the automotive sector. In 2021, the Vocational Education and Training Act of 2021 introduced the concept of Supra-Company Training Centres (SCTCs), providing practical training for pupils with apprenticeship contracts, facilitating the participation of SMEs. Yet, there are only two approved SCTCs so far (CEDEFOP, 2025[101]) and data on the participation of SMEs since the reform is lacking. Success of the programme should be monitored and assessed to ensure that the programme is fit for purpose.

To adapt the VET programme for new technologies, the National VET Council decided in 2024 on reducing the number of programmes in mechanical engineering from 39 to 16 and approving a new national curriculum for a ‘Autotronic’ programme that has common standards in the first year, offering the possibility of four specialisations over the next three years in cars, trucks and utility vehicles, one-wheeled vehicles, or electric cars. Over 10,000 students participated in the dual VET programme in 2024 in over 1,300 companies and 150 fields of study, where the most common ones were mechanical, automotive and electrical engineers. The automotive sector and supplying companies are the most active participants in the dual VET system, although other services sectors are increasingly participating (Ministry of Education, 2025[102]). Ensuring that the VET system stands ready to adapt to new technologies and opportunities like the green and digital transitions is crucial and will help students to specialise in new areas of growth.

A previous weakness in the Slovak VET system was the “F-type” lower secondary VET programmes, as they did not provide a final certificate allowing the acquisition of lower secondary education and opening the possibility to continue to upper secondary education. This has been addressed by introducing legal changes allowing students to complete lower secondary education in in a lower secondary vocational combined programme. An update of the VET curriculum is also under preparation to better align educational standards with labour market needs. These reforms and changes are welcome, as they keep pathways open to students to further studies and ensure that the VET system provides the necessary skills needed for the labour market.

2.4.3. Improving tertiary education, attracting skilled immigrants and expatriated nationals

The quality of tertiary education needs to be improved to foster skills and to retain and attract the most skilled students and teachers. Slovak higher education institutions are poorly ranked in international comparisons (OECD, 2024[9]; OECD, 2023[103]). Many highly skilled Slovaks leave the country for opportunities elsewhere. The share of high-school graduates that study abroad is the second highest in the OECD, and a large share of the Slovaks live abroad (Figure 2.32, Panel A). As of 2022, administrative data point to a return rate of 37-40% among Slovaks who graduated from secondary school during 2012–2015 and had studied abroad full-time. This can be contrasted with significantly higher rates among Nordic countries (Martinák et al., 2025[104]). The students who leave are typically the most successful students according to examination results (Martinák and Varsik, 2021[105]). This implies that the Slovak Republic is losing some of its most skilled workers. In 2023, performance agreements were introduced to boost the performance of Slovak universities. The first cycle of performance agreements covers the period 2024-2026. Moreover, to attract foreign talent, the Slovak Republic is implementing financial scholarships for talented students, as well as improving internationalization in higher education institutions.

Financial incentives to stimulate teaching and research excellence could be further strengthened. Public expenditure per tertiary student has increased but remains lower than in other OECD countries (OECD, 2023[106]). Funding allocations to higher education institutions is mainly based on a funding formula, which has recently been adjusted to give greater weight to research quality and measurable indicators. The funding formula could be further refined to consider the quality of employment via graduate earnings for example. Collaboration between higher education institutions, for example through centres of research and excellence initiatives to pool resources, could be expanded as in France, for example.

Net emigration from the Slovak Republic has stopped in the recent past, as more foreigners now enter the country and more Slovaks return (OECD (2022[86]) and Figure 2.32, Panel B). While there may be domestic benefits of Slovaks emigrating to other countries and forming a new Slovak-diaspora - in the form of remittances or new business networks and trade flows (Gould, 1994[107]; Docquier and Rapoport, 2012[108]; Parsons and Vézina, 2018[109]) - return migration can significantly strengthen economic development through knowledge sharing and innovation (Bucheli and Fontenla, 2025[110]).

Figure 2.29. Many Slovaks live abroad but return migration has increased recently
Copy link to Figure 2.29. Many Slovaks live abroad but return migration has increased recently

2.4.4. Strengthening life-long learning to reinforce adult skills

Reducing skills shortages across sectors and increasing adaptability of the economy calls for the continual development of adult skills. According to the OECD Survey of Adult Skills (PIAAC) for 2023, Slovak adults aged 16-65 scored, on average below or close to the OECD average in literacy, numeracy and adaptive problem solving, and better than the other Visegrád countries (Figure 2.30). Older adults (aged 55 to 65) displayed similar proficiency to younger adults and had better results than the OECD average. Meanwhile, young adults generally scored below the OECD average.

There are important gaps in the life-long learning system in the Slovak Republic. The coverage of the system is low compared to other OECD countries and participation is particularly low for groups that would benefit most from adult learning participation (OECD, 2024[9]). The government adopted a new Act on Adult Education in 2025, which also introduced micro-credentials through the 2024 Adult Education Act. Individual learning accounts (ILAs) are planned to be in place from January 2026 to strengthen participation in life-long learning and reskilling. This is welcome, as ILAs in other OECD countries are increasingly designed to promote labour-market-relevant learning, with eligibility criteria often shaped by qualification and occupational standards, as seen in countries such as France (OECD, 2025[111]). To ensure the new ILAs are effective in meeting emerging skills needs, policymakers must regularly review and update eligibility criteria to reflect evolving labour market needs. Co-payment requirements, like in Czechia and France, can help encourage learners to make more deliberate training choices by giving them a financial stake in the process. Yet, such contributions should remain modest to avoid creating barriers to participation, particularly for disadvantaged groups.

Training for the unemployed can help people adjust their skills to ever evolving labour market needs. In the Slovak Republic, training as a proportion of active labour market policies is among the smallest in the OECD (OECD, 2025[112]). Increasing the share of training in active labour market policies should be prioritised. Strengthening the counselling and guidance capacity of the public employment service and effective profiling of jobseekers to identify their needs and the most relevant training paths. Moreover, the network of labour offices or training centres needs to be expanded in underserved regions or municipalities to increase access to training opportunities for hard-to-reach unemployed adults.

Figure 2.30. Adult skills lag OECD countries
Copy link to Figure 2.30. Adult skills lag OECD countries

Average performance in literacy, numeracy and adaptive problem solving, PIAAC score points

An updated Action Plan for the years 2025-2027, part of the Lifelong Learning and Counselling Strategy for 2021-2030, includes measures to map and enhance basic skills for low-skilled adults. Alongside a focus on digital skills, this plan sets out an evaluation of the national qualification framework, and the implementation of micro-credentials. Micro-credentials will offer more flexible and practice-oriented pathways to upskilling and higher qualifications, including for students from socially disadvantaged backgrounds. Modularisation of education and training programmes has gained traction in recent years to certify learning from modules or even parts of modules. Micro-credentials have been shown to be an effective way of ensuring quality and allowing candidates to obtain a nationally recognised certificate of their professional qualifications, and has started to become common practice in other OECD countries (OECD, 2023[113]; OECD, 2023[114]). For example, in Ireland, micro-credentials are recognised as part of the national framework of qualifications, ensuring that learning outcomes and related qualification levels of micro-credentials are clearly established and can be compared to other qualifications acquired in the formal education and training system. In Australia, the South Australian Training and Skills Commission endorses some micro-credentials to guarantee that the learning outcomes of these programmes meet current and future industry needs.

Recommendation in previous Surveys	Action taken since 2024
Expand active labour market programs, in particular re-training measures for the low-skilled and persons at risk of job loss.	As of September 1, 2025, the amendment to the Employment Services Act has entered into force under the initiative “Work Instead of Benefits.” Individuals in material need who are capable of working will be encouraged to rejoin the labor market. Refusing a suitable job offer may result in the reduction or withdrawal of their minimum subsistence benefit. The amendment also extended the commuting allowance for individuals in material need who enter employment and introduced reimbursement of travel costs for job interviews or selection procedures. The amendment also expanded the scope of activation work for long-term unemployed individuals in material need, allowing them to perform services of public interest in areas such as social care, healthcare, education, culture, and sports. However, the activation allowance may be increased for those participating in education or employment.
Provide information on wage returns of graduates of VET training institutions.	A new interactive application developed by the Institute for Social Policy has been introduced, which maps the labor market outcomes of secondary and tertiary school graduates. The tool visualizes data on employment status, sectors of employment, and wage levels during the first year after graduation. It allows filtering by region, school, and field of study, offering detailed insights into wage returns and career paths.

Recommendation in previous Surveys

Action taken since 2024

Expand active labour market programs, in particular re-training measures for the low-skilled and persons at risk of job loss.

As of September 1, 2025, the amendment to the Employment Services Act has entered into force under the initiative “Work Instead of Benefits.” Individuals in material need who are capable of working will be encouraged to rejoin the labor market. Refusing a suitable job offer may result in the reduction or withdrawal of their minimum subsistence benefit. The amendment also extended the commuting allowance for individuals in material need who enter employment and introduced reimbursement of travel costs for job interviews or selection procedures. The amendment also expanded the scope of activation work for long-term unemployed individuals in material need, allowing them to perform services of public interest in areas such as social care, healthcare, education, culture, and sports. However, the activation allowance may be increased for those participating in education or employment.

Provide information on wage returns of graduates of VET training institutions.

A new interactive application developed by the Institute for Social Policy has been introduced, which maps the labor market outcomes of secondary and tertiary school graduates. The tool visualizes data on employment status, sectors of employment, and wage levels during the first year after graduation. It allows filtering by region, school, and field of study, offering detailed insights into wage returns and career paths.

MAIN FINDINGS	RECOMMENDATIONS (Key recommendations in bold)
Improving the business environment to facilitate growth
Levels of perceived corruption remain high and judicial independence weak. There is no comprehensive dedicated legal framework that regulates lobbying activities.	Increase the independence of the judiciary, including by introducing sufficient guarantees of impartiality in relation to the dismissal of members of the judicial council. Strengthen rules on lobbying, rules for preventing conflicts of interest, and for asset declarations across public officials.
The time to resolve administrative judicial cases increased significantly in 2023 and was among the highest in the EU.	Further encourage the use of alternative dispute resolution methods to improve judicial efficiency.
Very small companies that are relatively unproductive employ close to half of all employees. Numerous and costly procedures to start a limited liability company act as a barrier to growth for smaller companies.	Reduce the time, procedures and required capital for starting a limited liability company.
The Slovak Republic has more than 100 state-owned enterprises (SOEs) and their governance is less competition-friendly than among other OECD countries.	Manage SOE ownership functions according to unified standards of corporate governance and pool management expertise.
The share of self-employed is among the highest in the OECD. Advantageous tax rules and benefits system incentivise people to form sole proprietorship, and companies to hire them in lieu of full-time employment.	Continue to increase controls by the labour inspectorate to enforce labour law rules related to the definition of dependent employment and identify fictitious independent work.
The difference in statutory corporate tax rates between large and small companies is among the largest in the OECD. Differential taxes based on the size of profits can incentivise entrepreneurs to stay small and report earnings under the threshold, even if they have higher growth potential.	Eliminate corporate tax differentials between small and larger companies.
Marginal tax wedges are high for low- and high-income earners, discouraging work.	Reduce the large labour tax wedge by lowering social security contributions and increasing consumption, property and environmental taxes.
A financial transactions tax (FTT) was introduced in April 2025 to strengthen government revenues. FTTs are highly distortive taxes that reduce economic activity and may increase informality.	Abolish the financial transactions tax, while offsetting the fiscal impact.
Border procedures are cumbersome as compared to other OECD countries, and barriers to services trade remain.	Simplify and accelerate customs procedures through digitisation. Reduce barriers to services trade.
Fostering investment to boost innovation
The use of EU funds for public investment lags peer countries, largely reflecting deficiencies in project planning and preparation. Backloaded spending often results in higher implementation costs and reduced competition in public procurement. An investment Plan 2023-2050 is being prepared to streamline project preparation.	Strengthen project preparation and implementation capacity at line ministries and lower levels of government via targeted training. Monitor project implementation and systematically assess projects ex-post.
Subscriptions to high-speed fixed broadband and coverage of 5G are low compared to other OECD countries. Digitalisation of public services continues to lag.	Establish an ICT-focused centralised purchasing body for the government. Streamline processes to facilitate the deployment of digital infrastructure.
R&D subsidies are generous, while business R&D spending is low.	Make the R&D tax allowance refundable for small and young companies. Consider further expanding the use of direct R&D support, such as competitive R&D grants, while enhancing transparency and using more foreign evaluators and established independent agencies.
Tackling pressing skills shortages
Student’s performance in PISA is below the OECD average and Visegrád countries. Disparities in educational outcomes are high.	Direct further resources to support schools with a high proportion of students from socially disadvantaged backgrounds.
Slovak adults have lower skills than the OECD average and participation in life-long learning is low compared to other OECD countries.	Regularly review and update eligibility criteria for the new individual learning accounts (ILAs) to reflect evolving labour market needs. Introduce co-payment requirements, while ensuring that contributions do not create barriers to participation, particularly for disadvantaged groups.
Spending on training in active labour market programmes for the unemployed is among the lowest in the OECD.	Focus active labour market programs on (re)training measures for the low-skilled and persons at risk of job loss.
Many Slovaks conduct tertiary studies abroad and comparatively few return after their studies.	Expand the use of targeted funds for higher education institutions to reward teaching and research excellence.
Foreign-acquired qualifications for professions such as architects and engineers require national validations.	Remove national validation tests for qualifications acquired within the EU.

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