Slovakia Economic Analysis Essay Example For Students

Slovakia Economic Analysis Essay Country: Slovak Republic Formation of the Slovak RepublicThe Slovak Republic, or Slovakia, is located in Eastern Europe with a population of 5.4 million people and borders the countries of Poland, Austria, the Ukraine, and the Czech Republic (The World Bank). As originally part of the former nation of Czechoslovakia, the Slovak Republic has only recently begun to write its own history (Abizadeh, p. 171). During 1989 many revolts took place against eastern European governments under communism, including Czechoslovakia (Slovakia.Org, 20th Century). Both Slovaks and Czechs staged massive protests against communism in Czechoslovakia and ended the communist regime in November 1989 (Slovakia.Org, 20th Century). Under the new non-communist system of government, the two republics of Czechoslovakia were established: the Slovak Republic and the Czech Republic (Embassy of the Slovak Republic). In June 1990, with the federal and republic-level governments in place, free elections were held for t he first time in the country since 1946 (Slovakia.Org, 20th Century). The main concern of the new government was the transformation of Czechoslovakia from a state-controlled to a free market economy (Embassy of the Slovak Republic). Disputes arose between the two republics about reform process which focused on privatization, the encouragement of foreign investment, policy of macro-economic stabilization, price liberalization, and liberalization of foreign trade (Slovakia.Org, 20th Century). The Czech Republic was more economically developed than the industrial-based economy of Slovakia (Slovakia.Org, 20th Century). The transition to a market economy left the Slovak Republic to endure greater economic hardships than the Czech Republic (Sovakia.Org, 20th Century). For example, the federal government chose to dramatically cut the countrys defense industry, resulting in a large decrease in industrial production and a large rise in unemployment in Slovakia (Slovakia.Org, Slovak Economy). This took place because the economy that rose out of the communist era in Slovakia was based on industrial production, particularly on weapons and military equipment (Slovakia.Org, Slovak Economy). There was a great difference of opinions between the Slovaks and Czechs about the nature and pace of economic reform in Czechoslovakia (Slovakia.Org, 20th Century). The disagreements delayed the reform process and also the acceptance of a new constitution (Slovakia.Org, 20th Century). It became obvious that the current form of government could meet the demands of both republics. As a result, Slovakia declared its sovereignty in July 1992, in other words, its laws took higher priority than those of the federal government (Slovakia.Org, 20th Century). During November the federal parliament chose to officially break up the country, and on January 1 1993, the Slovak and Czech Republic replaced the Czechoslovakia as two independent countries (Abizadeh, p. 171). Recent Growth levels of the Slo vak EconomyThe economic problems that began in the early 1990s still plagued Slovakia after it claimed independence in 1993 (Abizadeh, p. 172). After its first year of independence Slovakias economy was in poor shape with a negative GDP growth of 3.7%, and inflation rate of 25.1%, and an increasing unemployment rate of 14.4% (National Bank of Slovakia). Overall, gross domestic product in Slovak Republic decreased a substantial 23.7% during the years 1990 to 1993. Through a slow reform process, however, positive macro-economic results have been accomplished over the recent years (Slovakia.Org, Slovak Economy). GDP growth has been positive since 1993 and recorded an annual growth of 4.4% in 1998 (The World Bank). Slovakias 1998 GDP per capita of 3,832 USD was very competitive with other central European countries (Embassy of the Slovak Republic). The budget deficit has been brought under control, and at the beginning of 1999, the inflation rate of 5.6% was the lowest among all transit ion economies (Embassy of the Slovak Republic). The decline in the inflation rate was due to developments in the capital markets and the banking sector, a decrease in food prices, price deregulation, and lower producer prices (Abizadeh, p. 172). Unemployment, on the other hand, is still a major problem in the Slovak republic. Since the end of the communist regime the rate of unemployment has been 10% or higher with no signs of improvement (Slovakia.Org, Slovak Economy). Unemployment is related to the consistent regional disparities and the inevitable restructuring of large companies (Embassy of the Slovak Republic). The most important part for Slovakia to convert to a market economy is to continue privatization of state-owned businesses and capital formation within the country (Abizadeh, p. 171). Although the privatization of small firms is complete, this sector still faces challenges such as government policy that favors large enterprises, obtaining financing at affordable interest rates, and an increase in corruption and organized crime (Tradeport). The privatization of large enterprises has also begun. Two major banks have been recently declared available for privatization (Tradeport). A government policy has also been approved that will allow the privatization of up to 25% of Slovak telecommunication (Tradeport). The governments efforts toward privatization have been limited by the amount of capital available in the Slovak economy (Tradeport). Unlike the past, the government is now encouraging foreign investors to participate in the privatization process to provide the needed capital (Abizadeh, p. 178). However, foreign investors seem to have a wait and see view involving changes in government policy that could open or close doors to industry growth and the return on investments (Tradeport). Essays on Generoso Pharmaceutical and Chemicals Inc. EssayForeign TradeInternational trade is an important and essential part of Slovak economic growth (Abizadeh, p. 173). The total volume of foreign trade in Slovakia increased by 16% in 1998. Economic growth in the future will depend on the countrys export performance (Embassy of the Slovak Republic). Slovakias primary exports include consumer goods, machine and machine equipment, industrial products, chemicals, raw materials, natural fuel, and foodstuffs (Embassy of the Slovak Republic). Exports increased by almost 16% in 1998 (Embassy of the Slovak Republic). Leading imports in Slovakia increased by 16.4% in 1998, which included machine and machine equipment, natural fuels, consumer goods, chemicals, industrial products, foodstuffs, and raw material (Embassy of the Slovak Republic). Foreign trade with European Union countries increased 35.4% in 1998 as compared to 1997 (Embassy of the Slovak Republic). The European Union is the Slovak Republics main trading partner, which accounted for 52.9% of foreign trade in 1998 (Embassy of the Slovak Republic). An Association Agreement was made between the European Union and the Slovak Republic in 1993 which has had substantial implications for foreign investment and trade in Slovakia (Embassy of the Slovak Republic). The Slovak Republic applied to the European Union in 1995 (Embassy of the Slovak Republic). Accession to the European Union is now the main economic and political objective of the Slovak Republic (Slovak Web). Slovakia and the World Trade OrganizationThe former Czechoslovakia became part of the General Agreement on Tariffs and Trade in 1947 (World Trade Organization). After its independence, the Slovak Republic became a member of the World Trade Organization on January 1, 1995 when the GATT was replaced by the WTO as a permanent international organization (World Trade Organization). One of the main principles of Slovakias foreign trade policy is to continue the liberalization of exports and imports (Embassy of the Slovak Republic). This principle is best applied by using market mechanisms to promote exports while protecting domestic producers and consumers (Embassy of the Slovak Republic). The WTO provides the framework for Slovakia to apply the use of market mechanisms to promote free and fair trade among domestic and foreign companies, all in conformity within international law (Embassy of the Slovak Republic). Unlike the GATT, the WTO deals with tangible as well as intangible goods. Thi s is important to the Slovak Republic because of the increase in services during recent years. ReferencesAbizadeh, Sohrab. The Return of Mitteleuropa. Commack, New York: Nova Science Publishers, Inc., 1998. Embassy of the Slovak Republic, Business and Economy, Washington, D.C., December 1999. (Located in the World Wide Web at http://slovakemb.com). National Bank of Slovakia, Selected Macro-economic Indicators, Bratislava, Slovak Republic. (Located in the World Wide Web at http://www.nbs.sk). Slovakia.Org, Slovak Economy. (Located in the World Wide Web at http://www.slovakia.org). Slovakia.Org, 20th Century. (Located in the World Wide Web at http://www.slovakia.org). SlovakWeb, The Slovak Republic and Its Economic Development, 1999, (Located in the World Wide Web at http://www.slovakweb.com). The World Bank Group, Slovak Republic at a Glance. (Located in the World Wide Web at http://www.worldbank.org). Tradeport, Slovakia Economic Trends and Outlook, September 1999. (Located in the World Wide Web at http://www.tradeport.com). World Trade Organization, About the WTO, Geneva, Switzerland, March 2000. (Located in the World Wide Web at http://www.wo.org). Economics Essays