EC: Slovak Economy Doing Well, But New Model and Reforms Needed

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illustration photo (photo by TASR)

Bratislava, February 27 (TASR) – Slovakia is doing well in terms of its economy, but it’s lagging behind in areas that are of key importance for future growth, states the European Commission in its Country Report Slovakia 2019 released on Wednesday.

The EC praised Slovakia for its high economic growth and low unemployment, but it can see challenges, for example, in persisting regional gaps, the quality of public institutions, education, science and research.

Slovakia occupies leading positions among EU countries in terms of macroeconomic results. “This means things look good for Slovakia from the viewpoint of growth and employment not only in this, but also in the next few years,” stated Ladislav Miko, head of the EC Representation in Slovakia.

However, Slovakia is failing in terms of approaching the EU average. “One of the conclusions of our analysis is that the current model based mainly on low salaries and attracting direct foreign investments seems to be exhausted in relation to convergence. If Slovakia is to start catching up with the EU again, it needs to switch to another model that will require systemic solutions and structural reforms,” said Miko, adding that Slovakia will make further headway only if it can significantly improve the quality of public institutions, the situation in education, personnel training, as well as adapting to new conditions, especially in terms of robotisation, IT and automatisation.

The report notes a certain improvement in tax revenues, but only at a slow pace, with the VAT-revenue gap one of the highest in the EU. The EC highly praised the Value for Money project, which it views as a model of successful policy.

Concerning the labour market the Commission highlighted, for example, the low unemployment rate. But the Slovak labour market is currently overheating, and expenditures on active labour market policy are still low. Although the poverty rate is falling, regional gaps still persist.

The Commission views the quality and efficiency of public institutions in Slovakia as low. It praised the modernisation of legal regulations within public procurements and moves to make this area more professional. Despite efforts at simplification, lengthy public procurement processes still threaten the drawing of EU funds. Several international indicators show Slovakia among the worst countries in the EU in terms of corruption. Although the judicial system shows signs of improvement, challenges concerning the effectiveness, quality and independence of the judiciary persist.

The EC views the launch of eHealth and DRG as positives in the Slovak health-care sector. It sees problems in accumulating health-sector debt and a lack of medical staff.

In the field of education the Commission praised a prepared measure for reducing the age of compulsory school attendance to five years and creating an independent accreditation agency. Among negatives it mentioned worsening study results among pupils and persisting low expenditures on education. The Commission also noted a general drop in public expenditures on research and innovation.