Subchapters:
- Basic data
- Public finances and the state budget
- Banking system
- Tax system
Basic data
According to cheeroutdoor.com, the Slovak economy, measured by GDP growth, grew by 3% year-on-year in 2021. In nominal terms, GDP worth 97.1 billion euros was created in 2021 and 87.9 billion euros at constant prices (after subtracting inflation). The total value of the generated GDP in 2021 at constant prices showed a decrease of 1.5% compared to 2019, i.e. the pre-pandemic period. Domestic demand mainly contributed to the overall performance of the Slovak economy. It showed growth throughout the year and grew by up to 3.2% by the end of the year. Its development was mainly contributed by the final consumption of households by 2.8% in the 4th quarter of 2021. After a certain decrease in the third quarter, investment activity also grew in the last quarter of 2021. Investments in real estate and industrial production accounted for the largest share of gross fixed capital formation.
For the whole year 2021, gross capital formation grew by 13.9% at constant prices, but almost the entire value of the growth is made up of the change in the stock level (by 13.3%). Investments alone (formation of fixed capital) reached a value of EUR 18.6 billion in 2021 (year-on-year growth of 2.8% in current prices and 0.6% in constant prices).
The Slovak economy is strongly focused on industry, which employs almost 700,000 people. people. The economy is vitally dependent on the automotive industry. It generates 13.9% of GDP, almost half of exports and industrial production. There are four car manufacturers in Slovakia and more than 350 suppliers for these car manufacturers. Slovakia is the largest producer of passenger cars in the world per 1,000 inhabitants. Other important industrial sectors include the electrical and chemical industry and metallurgy. From the individual sectors of the economy, services generate the largest part of GDP (almost 70%), followed by industry (22%), construction (5.7%), agriculture, forestry and fishing (2.5%).
The sectors of the economy produced a gross added value of 77.9 billion euros in 2021 at constant prices, which recorded year-on-year growth of 2.4%. The creation of added value in industry, which contributes 26.8% to the performance of the Slovak economy, was 8.1% higher year-on-year. The most dynamic year-on-year growth within industry was reported in the production of motor vehicles by 22.4% and in the production of metal structures by 20.2%.
In terms of spending, all components of GDP showed year-on-year growth in 2021. Foreign demand was 10.2% higher year-on-year and imports of goods and services were 11.2% higher. In total, domestic demand grew by 3.8% year-on-year due to the growth of gross capital formation by 13.9%, of which gross fixed capital formation grew by 0.6%. The components of final consumption also showed growth, expenditure on final consumption by households increased by 1.1%, expenditure in public administration by 1.6% and expenditure in non-profit institutions serving households by 4.3%.
Table from MOP + additionally balance of payments, indebtedness/GDP.
| Pointer | 2019 | 2020 | 2021 | 2022 | 2023 |
| GDP growth (%) | 2.3 | -5.2 | 3 | 4 | 3.8 |
| GDP/population (USD/PPP) | 34,047.70 | 31,412.60 | 33,390.00 | 36,200.00 | 38,520.0 |
| Inflation (%) | 2.8 | 2 | 2.8 | 5.3 | 3 |
| Unemployment (%) | 5 | 6.8 | 7.5 | 6.6 | 6.3 |
| Export of goods (billion USD) | 89.5 | 86.6 | 113.3 | 127 | 137 |
| Import of goods (billion USD) | 88.8 | 84.7 | 102.4 | 115.5 | 123.4 |
| Trade Balance (Billion USD) | -1.1 | 1.2 | -0.3 | -1.1 | 0.1 |
| Industrial production (% change) | 0.5 | -4.9 | 10.4 | 6.9 | 4.9 |
| Population (millions) | 5.5 | 5.5 | 5.5 | 5.5 | 5.5 |
| Competitiveness | 53/63 | 57/63 | 50/64 | ON | ON |
| OECD export risk | ON | ON | ON | ON | ON |
Source: EIU, OECD, IMD
Public finance and state budget
| Public finance | 2021 |
| State budget balance (% of GDP) | -5.9 |
| Public debt (% of GDP) | 61.5 |
| Current account balance (billion USD) | -1.9 |
| Taxes | 2022 |
| AFTER | ON |
| F.O | ON |
| VAT | ON |
The public administration deficit in 2021 reached 5.97 billion euros, which represents 6.2% of GDP. For comparison, the deficit in 2020 reached 5.06 billion euros (5.47% of GDP). The National Bank of Slovakia estimated the public administration deficit for 2021 at the level of 7.4% of GDP.
The state budget deficit in 2021 reached 7.014 billion euros, which represents 7.22% of GDP. Revenues of the state budget reached 17.197 billion euros and expenses amounted to 24.211 billion. euros. Similar to 2020, the size of the deficit in 2021 was also negatively affected by the Covid-19 pandemic. According to preliminary data, the volume of expenses in connection with the Covid 19 pandemic reached 3.02 billion euros, which is 1.59 billion euros more than in 2020.
Tax revenues amounted to EUR 13.546 billion, of which VAT traditionally reached the most significant volume (EUR 7.7 billion). Natural persons paid 3.29 billion euros in income tax, legal entities paid 2.87 billion euros in income tax, and the value of consumption tax reached 2.37 billion euros. State budget revenues from the EU budget amounted to EUR 2.27 billion, and income from dividends reached EUR 480 million.
General government debt exceeded EUR 61 billion in 2021, which exceeded the level of 63% of GDP. For comparison – in 2020, public administration debt reached EUR 55.181 billion and represented 60.6% of GDP, and in 2019 it was EUR 45.28 billion (48.2% of GDP). In 2021, the public debt increased year-on-year by almost EUR 7 billion.
The current account of the balance of payments in 2021 showed a deficit of EUR 1.910 billion. The deficit was mainly caused by a drop in primary revenues (a negative balance of EUR 1.67 billion). The financial account of the balance of payments showed a negative balance of EUR 1.487 billion, mainly due to the negative balance in the item other investments (- EUR 7.03 billion).
The foreign exchange reserves of the central bank (Národná banka Slovenska) reached EUR 8.49 billion at the end of 2021. The highest part of reserves is accounted for by securities (4.88 billion euros), followed by gold (1.64 billion euros) and SDRs (1.63 billion euros, which represents a significant increase compared to 2020, when they amounted to 372 million euros ).
Foreign debt at the end of 2021 reached a total of 13billion euros. The highest gross foreign debt was reported by the central bank (EUR 5billion), followed by the government (EUR 3billion), companies (EUR 1billion) and banks (EUR 1billion).
Expenditures for servicing the national debt in 2021 reached almost EUR 657 million (0.68% of GDP).
Banking system
The banking system consists of the central bank, commercial banks, branches of foreign banks and specialized state banks. The bank is a legal entity based in the Slovak Republic, established as a joint-stock company, which accepts deposits and provides loans and has a banking license granted to perform these activities. According to Act No. 483/2001 Coll. on banks, the central bank decides on the granting of a banking license. The basic condition for granting a banking license is a cash deposit in the bank’s capital of at least EUR 1million. The banking license is granted for an indefinite period and is not transferable to another legal entity, nor is it transferred to a legal successor.
The central bank of the Slovak Republic is the National Bank of Slovakia (NBS). Since January 1, 2009, the NBS has been part of the European System of Central Banks. The main task of the NBS is to maintain price stability. To this end, it participates in the common monetary policy. Among other things, the NBS issues euro banknotes and coins, supports the smooth functioning of payment systems and settlement systems, ensures and coordinates monetary circulation and payment systems, maintains foreign exchange reserves and carries out foreign exchange operations. The NBS exercises direct supervision over the financial market in Slovakia. The highest body of the NBS is the Banking Council, which has 6 members. The members of the bank board are the governor, 2 vice-governors and 3 other members. The term of office is six years. Former Finance Minister Peter Kažimír has been the governor of the NBS since June 1, 2019.
By the end of 2021, 18,800 people worked in the banking sector in Slovakia. The profit of the sector in 2021 reached 72million euros, a year-on-year increase in profit of 54.7%. Most of the profit (65.2%) was generated by the 3 largest banks by number of employees – Slovenská sporiteľňa, VÚB banka and Tatra banka. Other important commercial banks include ČSOB, Poštová banka and Prima banka. Specialized state banks include Slovenská záručná a rozvojová banka and Eximbanka SR. The volume of loans granted in 2021 reached EUR 68.5 billion and was 7.5% higher year-on-year. Customer deposits increased by 4.7% year-on-year to EUR 70.3 billion in 2021.
Tax system
The tax system has had its current structure since 2004. The main points of the reform at that time were:
– reduction of direct taxes
– cancellation of some property taxes (donation, inheritance, property transfer)
– cancellation of flat-rate taxes for self-employed persons.
The tax system used to change frequently, which was criticized. The government therefore adopted a law in 2020 according to which changes in taxes can only occur on January 1 of the following year. The tax system is thus starting to stabilize.
Overview of taxes in Slovakia:
Personal income tax – 19% (taxable income up to 37,981.94 euros), 25% (taxable income above 37,981.94 euros)
Social and health insurance contributions
– the employee pays 13.4% of the gross salary (9.4% social, 4% health), the maximum monthly assessment basis for social insurance is 7,644 euros, there is no provision for health insurance.
– the employer pays 34.4% of the employee’s gross salary (24.4% social, 10% health), the maximum monthly assessment base for social insurance is 7,644 euros, there is no provision for health insurance.
Corporate income tax – 21%, reduced rate of 15% for annual taxable income up to 49,970 euros (ie the limit of mandatory registration for VAT payers).
Capital gains tax – 19%, 25%
Value added tax – 20%, reduced rate 10% (some food, medicine, medical supplies, books, newspapers, magazines, accommodation).
Tax on dividends – 0% (company-resident of the SR), 7% (person-resident of the SR), 35% (company and resident of countries with which the SR does not have a tax treaty).
Consumption tax – gasoline, diesel, alcohol, tobacco.
Other taxes:
Property tax – governed by the Local Tax Act. It is divided into tax on land, buildings and apartments.
Motor vehicle tax – vehicles used for business purposes are subject to it.
Insurance tax – in non-life insurance sectors.
Special levy in regulated industries – e.g. energy, insurance, postal services,
The tax reliability index was introduced in Slovakia in 2019 and was closed to the public until January 2022. From 1 January 2022, there will be a change and the tax reliability index will be publicly available information.
An overview of the Slovak tax system is available at: https://www.pwc.com/sk/sk/publikacie/dane-do-vrecka-2021.html
