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Slovakia, Economy

state hands, EBRD, European Bank, world market, significant rise

The reintroduction of an economy based on free enterprise has been a difficult process in Slovakia. Because much of the country’s industrialization took place during the Communist era, many Slovakian industries were inefficient and produced goods that were not competitive in the world market. To modernize these industries and retrain workers has required foreign investment, but this has been slow in coming, due in part to perceived political instability in the country. Compounding the problem of outmoded industry was the Czechoslovak government’s decision in the early 1990s to drastically reduce the country’s defense industry. The production of weapons and other military equipment had been based largely in Slovakia and had employed as much as 10 percent of the Slovak workforce in the 1980s. The reduction led to a decline in overall industrial production and a significant rise in unemployment.

The Slovak economy has improved somewhat in recent years. Between 1993 and 1994, gross domestic product (GDP) grew by 4.3 percent, inflation fell from more than 20 percent to about 12 percent, and the budget deficit was brought under control. The pace of change remains slow, however. A fundamental part of the conversion to a market economy is the return of state-controlled enterprises to private ownership. Although many new private firms have been established in Slovakia’s service sector, most of the industrial sector remains in state hands, and privatization has been virtually halted in recent years by the parties controlling Slovakia’s government. In 2000 the GDP was $19.1 billion.

Slovakia is a member of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank), as well as of the European Bank for Reconstruction and Development (EBRD). In October 1993 Slovakia became an associate member of the European Union (EU). In December 1997 the EU invited Slovakia to become a full member at an undetermined time in the future, in the organization’s second round of expansion.

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Article key phrases:

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