Return to: Index of "1993 Country Reports on Economic Practice and Trade Reports" ||
Index of "Economic and Business Issues" || Electronic Research Collections Index || ERC Homepage


                       THE SLOVAK REPUBLIC

                     Key Economic Indicators
     (Billions of Slovak crowns (SK) unless otherwise noted)

                                   1991      1992      1993 /1 
Income, Production,
 and Employment

Real GDP (1984 prices) /2/7       191.3     177.9     190.0
Real GDP Growth (pct.)            -11.2      -7.0      -7.0
GDP (at current prices) /2        282.3     270.0     322.0
By Sector: /6
  Agriculture                      16.0      15.3       n/a
  Industry                        168.7     151.3       n/a
  Services                         97.6     103.4       n/a
Net Exports of
 Goods and Services               120.1       n/a       n/a
Real Per Capita GDP (crowns)      36,165    33,516    35,849
Labor Force (000's)                2,850     2,764     2,347
Unemployment Rate (percent)         4.1      10.4      14.0

Money and Prices /5

Money Supply (M2)                 698.2     223.6     255.2
Base Interest Rate (pct.) /3       13.16     13.38     14.71
Personal Saving Rate (pct.)         8.00      6.58      7.88
Retail Inflation (pct.)            61.2      10.0      25.0
Wholesale Inflation (pct.)         68.9       5.3      19.0
Consumer Price Index                n/a       n/a       n/a
Exchange Rate (SK per $)
  Official                        29.57     28.26     32.09
  Parallel                        32.28     30.50     33.00

Balance of Payments and Trade
 (million U.S. dollars)

Total Exports (FOB) /4            3,438     3,624     4,725
  Exports to U.S.                    28        47        44
Total Imports (CIF) /4            3,597     3,564     4,750
  Imports from U.S.                  41        58        68
Aid from U.S.                        19.29     28.51    n/a
Aid from Other Countries            n/a       n/a       n/a
External Public Debt                n/a     2,322     2,800
Debt Service Payment (paid)         n/a       n/a       242
Gold and FOREX Reserves             n/a       790     1,170
Trade Balance /4                   -159        60       -25
  Balance with U.S.                 -13       -11       -24


1/  1993 Figures are all estimates based on available monthly
    data in October 1993.
2/  GDP at factor cost; 1991 and 1992 figures estimated.
3/ Figures are actual, average annual interest rates, not
changes in them.
4/  Merchandise trade.
5/  1991 Figures are for CSFR.
6/  In Slovak practice, industry includes energy,
    manufacturing, and construction; services include rents,
    financial services, and government services.
7/  In 1993 ESA method of measuring GDP replaced MPS method.

1.  General Policy Framework

    On January 1, 1993, the Slovak Republic formally began its
existence, following the breakup of the Czech and Slovak
Federative Republic (CSFR).  The economic structure of the new
Slovak state resembles that of the former state in many
respects; assets and liabilities were divided between the two
republics generally on a two-to-one basis and on a territorial
basis where applicable.  A monetary union between the two
republics collapsed after less than two months, but a customs
union providing for free movement of goods and services and
prohibiting tariff barriers within the former CSFR remains in

    In addition to the ongoing difficulties of converting a
centrally-planned economy which had specialized in heavy
industry to a modern market economy able to compete in Europe,
Slovakia also faced the strain of creating new government
institutions (e.g., a central bank) with few trained and
experienced personnel.  Data collection and analysis are
sometimes insufficient due to both resource and conceptual
difficulties.  Most of the competitive industry in the CSFR was
located in the Czech Republic, as was most of the foreign
investment and financial expertise.  In consequence,
unemployment is quite high in Slovakia.  The once-powerful
armaments industry now produces at less than ten percent of its
1988 level.

    Slovakia has made clear its desire for EC membership at the
earliest opportunity, and signed an EC association agreement in
October 1993 (ratified the same month by the European
Parliament and awaiting ratification from EC member states). 
The government adheres to EC standards wherever possible in
modernizing infrastructure and legislation.  Slovakia
emphasizes its central location, skilled and low-cost labor
force, industrial tradition, and familiarity with its eastern
neighbors in advertising itself as a bridge between East and
West for business.

    The central government budget deficit was the subject of
negotiation with the IMF; the government's deficit target was
16 billion Slovak crowns (SK), or seven percent of GDP in
1993.  By November it appeared that this target would be
reached, although off-budget items might increase the total by
several billion SK.  The deficit was caused both by
insufficient tax revenues due to the creation of a new tax
system, and by high levels of social spending judged to be a
necessary response to the dislocations caused by the process of
economic transformation.  Still, the government has been trying
to reduce the generous levels of social payments such as
unemployment compensation.  A new insurance system was
established in January 1993, intended to become self-financing
(and off-budget) in 1994; flaws in the system contributed
substantially to the budget deficit in the first half of 1993. 
The deficit was primarily financed by domestic banking sources,
leading to a severe shortage of credit available to private
sector borrowers.  Borrowing from the IMF, World Bank, EBRD,
and other international lenders was also significant.

    Monetary policy was restrictive and aimed successfully at
conserving foreign exchange resources and limiting inflation. 
The central bank (National Bank of Slovakia, or NBS) maintained
a tight refinancing policy.  The NBS tended to use the same
instruments as had the federal central bank in 1992, mostly
indirect controls.  Reserve requirements remained stable; open
market operations and currency swaps are little used, being at
an undeveloped level.  Banks themselves (16 are active in
Slovakia) tended to purchase government securities as their
liquidity increased, drying up credit available to private
borrowers.  The central bank intended to raise credit
availability cautiously late in 1993.

2.  Exchange Rate Policy

    After the division of Czechoslovakia, the two successor
republics hoped to maintain a monetary union for at least six
months.  This proved impossible and the two currencies
separated on February 8.  Czechoslovak banknotes with Slovak
stamps remained valid until the phased-in introduction of
newly-printed notes, which began in August.  The Slovak crown
is pegged to a basket of five international currencies under
the supervision of the National Bank of Slovakia.  The crown
was devalued by ten percent on July 9; since that time it has
remained stable at approximately 32 crowns to the dollar.

    With respect to current account transactions, the crown is
internally convertible for enterprises and may move toward full
convertibility in the next year.  Individuals may maintain hard
currency accounts and are entitled to purchase 7,500 crowns'
worth of hard currency a year for travel abroad.  Companies
registered in Slovakia may earn hard currency but must deposit
it in crown accounts; they may purchase hard currency for
business reasons, subject to some limitations (see section 5). 
Investors may keep their initial investment in hard currency
and may repatriate 100 percent of their profits in hard

3.  Structural Policies

    Restitution:  The CSFR passed laws during 1990-92 governing
return of private property seized by the government after
February 1948.  Deadlines for filing claims have expired,
except in the case of religious community property, for which
new legislation will take effect in January 1994.  The new
legislation includes provisions for restitution claims on
Jewish community properties seized after November 2, 1938.  The
government also amended laws on agricultural restitution,
permitting claims of up to 250 hectares of land (150 hectares
for arable land).  By the end of 1992, 107,842 restitution
claims covering 144,976 hectares of land had been filed.  Of
this total, about two-thirds had been awarded to claimants by
the end of 1992.

    Privatization:  Small-scale privatization began in 1991 and
is nearly complete in Slovakia.  Approximately 10,000 small 
enterprises, including 6,500 retail shops, have been
privatized; privatization of urban housing was to follow in
late 1993.  The first wave of large-scale privatization began
in 1991 and by September 1993, 703 enterprises valued at $5.3
billion had been privatized.  Political and conceptual changes
within the Slovak government, along with bureaucratic
bottlenecks and difficulties in establishing ownership, have
led to numerous delays in the second wave.  The second wave,
involving 635 enterprises valued at $6.3 billion, technically
began in 1992 but will begin in earnest in 1994.  The current
government is pursuing a mixed approach to privatization which
includes standard methods (direct sale, public auction, and
public tender), and the voucher method, but on a smaller scale
than in past years.  The government is giving priority to
attracting foreign investment, and has recently succeeded in
increasing the pace of privatization.  Establishment of land
ownership has proved very complicated; most land was
state-owned and is now administered by the Slovak Land Fund,
and at present can be rented but not purchased.  The
contribution of the private sector to GDP was estimated at 28
percent at the end of 1993.

    Commercial Code:  The Code adopted in Czechoslovakia in
1992 remains valid in Slovakia.  Key points for U.S. investors
include a low level of government screening of foreign
investment, other than for privatization of certain state
enterprises; equal treatment with Slovak citizens for
conducting business; and elimination of most restrictions on
foreign investment.  The United States - Czechoslovakia
Bilateral Investment Treaty (BIT) of 1992 remains in force in

    Taxes:  Slovakia introduced a new tax system in January
1993, with modifications later in the year.  Taxes are measured
by the calendar year and consist of a Value Added Tax (VAT) of
25 percent on most items and six percent on basic foodstuffs
and essentials; an excise tax; personal income tax of 15 to 47
percent and corporate income tax of 45 percent; and taxes on
real estate, auto registration, inheritance, gifts, etc. 
Measures were also taken to improve collection and increase
penalties for evasion.  Significant tax incentives exist for
companies (especially banks) founded in Slovakia after December
31, 1992, depending on the location and level of foreign
capital invested.  The United States and Slovakia signed a
dual-taxation treaty in October 1993 which will enter into
force upon ratification by both countries.
    Price liberalization:  Nearly all (96 percent) price
controls have been removed; controls on food, fuels, energy,
heat, etc. remain but will be phased out by December 1995, with
periodic administered price increases during the next two years
to bring prices to market levels.  Government-granted monopoly
rights no longer exist.

    Bankruptcy:  Slovakia adopted the 1991 federal law on
bankruptcy with additional amendments in June 1993.  Under the
law, a board of creditors formed by court recommendation may
take control of enterprises in bankruptcy proceedings; the
board has three months to work out a recovery program before
liquidation occurs.  At the end of 1992 unresolved claims of
Slovak companies totaled 87 billion SK ($2.7 billion).  About
12 percent of this amount had been settled by November 1993 via
a new mandatory clearing system for enterprise debt (focused on
companies in "secondary insolvency", i.e. those who could
operate successfully if their debtors paid them).  The problem
of secondary insolvency has been an important hindrance to
economic reform, complicating efforts to distinguish efficient
companies from inefficient ones; the former find it difficult
to operate or attract investment due to their unresolved
claims, while the latter continue to receive government

4.  Debt Management Policies

    Slovakia has a low level of foreign debt, about four-fifths
of which is medium- and long-term.  As of July 1993, gross
foreign debt was $2.8 billion (roughly 28 percent of GDP), up
from $2.3 billion in December 1992.  Of this, about 40 percent
represented debt incurred by domestic banks and enterprises and
government obligations from former federal institutions
accounted for the remainder.  This is slightly above program
targets set by the IMF.  Slovakia inherited about 27 percent of
the federation's external debt.  Debt service payments are
about 5.5 percent of exports.  Slovakia holds claims of $1.6
billion on various countries around the world, but all
bilateral repayment agreements were canceled prior to the
dissolution of the federation.  The former Soviet Union is by
far the largest debtor, owing nearly $750 million (in
non-convertible currency).  Claims in convertible currency
total $305 million.  Payments to and from the Czech Republic
are handled through an ECU clearing system.

    Bad debts:  Lack of data makes it difficult to quantify the
serious problem posed by bad debts of the Slovak banking
system.  Much of the problem dates back several years to the
Communist era.  In 1991 Czechoslovakia established a
Consolidation Bank to centralize debts and liabilities of the
banking system, and subsequently the federal National Property
Fund issued bonds to aid debt write-downs and bank
re-capitalization.  Passage of the amended bankruptcy law in
June 1993 should increase the transparency of the debt problem,
along with the institution of a clearing system for
inter-enterprise debt in October 1993.

    Loan guarantees:  Slovakia has significantly reduced its
outlays on government loan guarantees, primarily for
infrastructure projects; as a share of the budget these fell to
15 percent in 1993, down from 23 percent in 1992.  The
government hopes that commercial banks will be able to play a
more active role in providing loan guarantees in 1994.

    Adjustment Programs:  In July 1993, the IMF approved a
Systemic Transformation Facility (STF) of approximately $180
million, to be disbursed in two equal tranches for Slovakia. 
An IMF advisor is resident in Bratislava.  The STF is designed
to facilitate Slovakia's adjustment to the fiscal and external
imbalance resulting largely from the end of fiscal transfers
from the federal government in Prague, and to accelerate
structural reform.  The IMF is negotiating a $100 million
Standby Arrangement for Slovakia.  In November 1993, the World
Bank approved a $80 million Economic Recovery Loan (ERL), which
would act as a balance of payments stabilization fund.  The
Japanese intend to match that amount to provide balance of 
payments support and assist in the reform of the social safety
net.  The World Bank, the EBRD and the Slovaks have approved a
$180 million telecommunications sector program, and the World
Bank is considering additional loans for the financial,
forestry, and energy sectors.

5.  Significant Barriers to U.S. Exports

    The principal impediment for exporters to Slovakia in 1993
was the existence of temporary financial regulations governing
payments to foreign suppliers for products and services.  The
regulations, designed to check the outflow of scarce foreign
exchange, permitted only a 15 percent initial payment and
required a 90-day delay for payments over one million SK
(roughly $31,000).  Capital goods require supplier credits of
one year or more.  The regulations reportedly were eliminated
at the end of 1993.

    Import licenses:  Import licenses are governed by the 1991
decree of the former Czechoslovak Ministry of Foreign Trade,
which remains valid under Slovak law.  The decree divides
commodity items into "general" and "specific" categories for
the purpose of licensing.  For most of the approximately 100
groups of items in the "general" category, obtaining a license
is a formality.  In the remaining ten percent of cases (in
which a favorable decision of the Ministry of Economy is
required) obtaining a license may be more difficult, for
reasons related to environmental concerns, existing quotas, etc.

    Items in the "specific" category fall into three groups: 
pharmaceuticals, weapons, and COCOM items.  In these cases a
favorable decision from the Ministry of Economy is required. 
Among its criteria for decision the Ministry includes
consideration of environmental and health factors as well as
the impact on domestic producers.

    Services:  Permission from the National Bank of Slovakia
(NBS) is required to offer banking services.  Insurance
companies must obtain a license from the Ministry of Finance. 
Permission from the Ministry of Finance is required for stock
exchange services.  Foreign entities are welcome to join
existing stock and options exchanges, but no provisions exist
under the 1992 law for establishing new exchanges.  A license
from the Chamber of Commercial Lawyers is required in order to
provide legal services.  Licenses may be granted to individuals
and general partnerships, but not to limited liability
companies.  No special permission is required to offer travel
or ticket services or air courier services.

    Standards, testing, labelling, and certification:  The
Slovak Office of Standards, Metrology and Testing is the
responsible office for reviewing a wide range of products. 
Both compulsory and voluntary testing are done at 16 testing
centers under the direction of this office.  Testing is
compulsory for products in the "regulated" sphere, defined as
those which may pose threats to health, life, safety, and the
environment.  This sphere consists mainly of foodstuffs,
kitchen devices, medicines, electrical equipment, engineering
products, agricultural machinery, plastics, paints, polishes,
cosmetics, and sporting goods.  Voluntary testing may be done
at the request of the producer or importer wishing to obtain a
certificate.  Slovakia intends to introduce its own system of
labelling by the end of 1993, replacing the old Czechoslovak

    Investment:  To date Slovakia has taken a very positive
stance toward foreign investment, though procedural barriers
exist.  Foreign citizens may not own land in Slovakia, but may
form legal entities in Slovakia which in turn are permitted to
purchase land.  There are no significant barriers to
participation of foreign equity or personnel, repatriation of
profits or capital, restrictions on downstream services, or
lack of national treatment.  The government has made clear that
certain sectors (e.g., some telecommunications services) will
not be privatized in the short run.  It is too early to say
with certainty whether considerations of employment or
development of favored industries will adversely affect the
interests of foreign investors.

    Government procurement practices:  No "buy Slovak" law
exists, but the government is sensitive to the concerns of
local producers whose existence is threatened by the pace of
economic reform and the emergence of efficient competitors. 
The government has stated that in certain instances, the
potential for local job creation will weigh heavily in judging
bids for newly-privatized enterprises.

    Customs procedures:  Procedures are not intrinsically
complicated or burdensome.  The basic form required is the
"Unified Customs Declaration" which conforms to EC standards. 
Occasional problems have arisen in individual cases, usually
due to the unfamiliarity of one or more parties with the new

    The Slovak Republic succeeded to Czechoslovakia's
membership in GATT, and bases its foreign trade policy on GATT
principles, including the GATT subsidies code.  Slovakia is a
participant in Uruguay Round discussions and in the following
agreements:  Multi-fiber Arrangement, Technical Barriers to
Trade Agreement, Licensing Procedures Agreement, and Agreements
on GATT Articles VI and VII.

6.  Export Subsidies Policies

    Slovakia is a member of the GATT subsidies code.  The
tariff schedule is inherited from the federation; rates are low
and average about six percent.  Imports from developing
countries enjoy GSP preference.  There are currently no direct
subsidies for Slovak exports, though indirect subsidies exist
in areas such as housing, agriculture, and energy.  A proposal
to impose an import surcharge of 20 percent was considered but
not implemented in 1993.

7.  Protection of U.S. Intellectual Property

    The Slovak Republic is a signatory to the same conventions
as the former Czechoslovakia, e.g. the Bern, Paris, Stockholm,
Madrid, Nice, Lisbon, Locarno, Washington, Strasbourg, and
Budapest conventions.  Slovak laws and regulations on
intellectual property are identical to those of the former 
Czechoslovakia, as the Slovak Republic in early 1993 passed
legislation adopting all former federal laws.  Slovak laws in
this area are compatible with Western European legislation.  A
new law on administrative fees was passed in 1993; a law on
trademarks is expected in 1994.  Slovakia is a successor to
Czechoslovak membership in the World Intellectual Property
Organization (WIPO).  The U.S. Embassy is not aware of disputes
involving U.S. interests in the area of intellectual property

8.  Worker Rights

    a.   Right of Association

    There are no government restrictions on the constitutional
right of workers to form or join unions in Slovakia, except
that the armed forces are excluded from this right.  Unions are
independent of the government and political parties; at present
roughly 70 percent of the labor force is organized.  All
workers enjoy the right to strike, except those in sensitive
positions such as judges, prosecutors, members of the armed
forces, police, and fire-fighters.

    b.   Right to Organize and Bargain Collectively

    Collective bargaining is protected by law and freely
practiced throughout Slovakia.  Wages are set by free

    c.   Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is prohibited by law.  There is
no evidence that violations have occurred.

    d.   Minimum Age for Employment of Children

    The labor code forbids employment of children under the age
of 16.  Exceptions are made for 15-year-olds who have completed
elementary school and for 14-year-olds who have completed
courses at special schools for the disabled.

    e.   Acceptable Conditions of Work

    The Office of Labor Security issues standards on security,
and the Office of Hygiene issues standards on health at the
work place.  On October 18, 1993, the minimum monthly wage was
raised to 2450 SK.  The law mandates a standard workweek of
42.5 hours, which may be modified by collective bargaining. 
Caps exist on overtime and workers are assured of at least 30
minutes' paid rest per work day, and annual leave of three to
four weeks per year.

    f.   Rights in Sectors with U.S. Investment

    Workers' rights in sectors with U.S. investment are the
same as in other enterprises in Slovakia.

         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (millions of U.S. dollars)

Category                                    Amount

Petroleum                                                 0
Total Manufacturing                                       D
    Food & Kindred Products                     D
    Chemicals and Allied Products               D
    Metals, Primary & Fabricated                0
    Machinery, except Electrical                *
    Electric & Electronic Equipment             0
    Transportation Equipment                    0
    Other Manufacturing                         0
Wholesale Trade                                           D
Banking                                                   D
Finance and Insurance                                     0
Services                                                  0
Other Industries                                          D

TOTAL ALL INDUSTRIES                                    117

Note:  Above figures are for the former Czechoslovakia. 
Disaggregated figures for the Slovak Republics are not yet

(D)-Suppressed to avoid disclosing data of individual companies
(*)-Less than $500,000

Source:  U.S. Department of Commerce, Bureau of Economic

To the top of this page