COMMISSION STAFF WORKING DOCUMENT Country Report Slovakia 2017 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2017 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2017) 90 final} {SWD(2017) 67 final to SWD(2017) 93 final}
Date: 2017-02-27
Institutions: European Commission, Secretariat-General
Subjects: EU employment policy, EU investment, Slovakia, economic development, economic recovery, euro area, fiscal policy, macroeconomics, multilateral surveillance, structural adjustment

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 27.2.2017  SWD(2017) 90 final/2   CORRIGENDUM  This document corrects SWD(2017) 90 final linked to COM(2017) 90 final of 22.2.2017. Concerns the EN and SK language versions. Corrections on page 1.   The text shall read as follows:  COMMISSION STAFF WORKING DOCUMENT Country Report Slovakia 2017 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2017 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011  {COM(2017) 90 final} {SWD(2017) 67 final to SWD(2017) 93 final}  
 
 
CONTENTS 

Executive summary 

1. 

Economic situation and outlook 

2. 

Progress with country-specific recommendations 

3. 

Reform priorities 

3.1.  Public finances and taxation 

3.2. 

Labour market, education and social policies 

3.3. 

Investment 

3.4. 

Sectoral policies 

3.5.  Public administration 

A.  Overview Table 

B.  MIP Scoreboard 

C. 

Standard Tables 

References 

LIST OF TABLES 

1.1. 

2.1. 

B.1. 

Key economic, financial and social indicators - Slovakia 

Summary table on 2016 CSR assessment 

The MIP scoreboard for Slovakia 

C.1. 

Financial market indicators 

C.2. 

Labour market and social indicators 

C.3. 

Labour market and social indicators (continued) 

C.4. 

Product market performance and policy indicators 

C.5.  Green growth 

LIST OF GRAPHS 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

Real GDP and its components 

GNI per capita (in PPP, EU28 = 100) 

Investment 

Regional GDP per capita (EUR; 2014) 

Exports and real effective exchange rate (REER) 

1 

4 

11 

14 

14 

19 

27 

31 

35 

39 

43 

44 

49 

10 

12 

43 

44 

45 

46 

47 

48 

4 

4 

5 

5 

6 

 
 
 
 
1.6. 

1.7. 

1.8. 

1.9. 

Unemployment and activity rates 

Labour shortages (% of respondents) 

Inflation (y-o-y in %) 

Loans to sectors (y-o-y in %) 

1.10.  House prices 

3.1.1.  Effective tax rates in Slovakia 

3.1.2.  Proportion of patients who visited an emergency department because the primary care 

physician was not available 

3.2.1.  Job finding and separation rate 

3.2.2.  Unemployment by duration, 2015 

3.2.3.  Personal characteristics of the long-term unemployed, 2014 

3.2.4. 

Inactivity trap by percentage of the average wage, 2014 and 2015 

3.2.5.  Employment rate by gender and age, 2015 

3.2.6.  Poverty gap for selected groups 

3.2.7.  Salary of teachers, relative to earnings for full-time, full-year workers with tertiary education 

(ISCED 5 to 8) 

3.3.1.  Simulation of a public investment shock (deviation from baseline in pps. of GDP) 

3.3.2.  Road network coverage and unemployment 

3.4.1.  Summary restrictiveness indicator for regulated professions (2015) 

3.4.2.  R&D intensity in Slovakia in 2000-2015 

3.4.3.  Primary energy intensity (toe/GDP) 

3.5.1. 

Time needed to resolve litigious civil and commercial cases (first instance, in days) 

3.5.2.  Perceived incidence of irregular payments and bribes (Index, 2016) 

LIST OF BOXES 

2.1. 

Contribution of the EU budget to structural change in Slovakia 

3.3.1. 

Investment Challenges 

6 

7 

8 

8 

9 

14 

18 

19 

19 

20 

21 

22 

23 

26 

28 

29 

32 

32 

34 

37 

38 

13 

30 

 
 
 
 
EXECUTIVE SUMMARY 

This  report  assesses  Slovakia’s  economy  in  the 
light  of 
the  European  Commission’s  Annual 
Growth  Survey  published  on  16 November 2016. 
In the survey the Commission calls on EU Member 
States  to  redouble  their  efforts  on  the  three 
elements  of  the  virtuous  triangle  of  economic 
policy — boosting investment, pursuing structural 
reforms and ensuring responsible fiscal policies. In 
so  doing,  Member  States  should  put  the  focus  on 
enhancing  social  fairness  in  order  to  deliver  more 
inclusive growth.  

strong 

fell  markedly 

labour  market 

Slovakia's economic expansion continues at one 
of  the  fastest  rates  in  the  EU.  According  to  the 
Commission  winter  2017  forecast,  real  GDP  is 
projected  to have  increased by  3.3 %  in  2016 due 
mainly to favourable developments in net exports, 
as well as solid household spending growth amidst 
recovery.  Overall 
a 
investment  activity 
in  2016 
compared to 2015 as public investment returned to 
more  normal  levels  after  the  end  of  the  previous 
programming  period  for  EU  funds.  Real  GDP 
growth is expected to be around 3% in 2017 and to 
increase  to  3.6%  in  2018.  Accelerating  private 
consumption is set to remain the strongest driver of 
growth in both years, buttressed by steady gains in 
employment  and  robust  wage  growth.  In  the 
medium  term,  public  investment  expenditure  is 
expected  to  rise  well  above  2016  levels  — 
including  in  health  and  transport  —  while  private 
investment  in  expanding  production  facilities  in 
Slovakia's  large  automotive  industry  will  also 
support  overall 
investment  growth.  Subdued 
external  demand,  including  for  the  output  of  the 
automotive  sector,  represents  the  main  downside 
risk to the medium-term outlook. 

The  labour  market  has  witnessed  a  cyclical 
improvement.  The  unemployment  rate  fell  to 
9.7%  in  2016,  almost  full  two  percentage  points 
below the previous year, and is expected to decline 
further  in  2017  and  2018  on  the  back  of  robust 
economic 
long-term 
expansion.  However, 
unemployment  still  represents  a  key  challenge, 
reflecting  pronounced  geographical  differences  in 
labour  market  conditions,  accompanied  by  low 
labour  mobility.  Inadequate  educational  outcomes 
socioeconomic 
and 
linked 
the 
background  represent  major  obstacles 
improvement  of  human  capital,  with  potential 
knock-on  effects  for  skill  levels  and  growth 
potential. 

inequalities 

to 

to 

for 

accounts 

While  Slovakia's  economy  is  highly  integrated 
into  global  value  chains,  production 
is 
concentrated in only a few sectors and regions. 
The  country's  specialisation  in  automotive  and 
electronics  manufacturing 
a 
significant  proportion  of  domestic  output  and  is 
concentrated mainly in the western region. Lack of 
appropriate  infrastructure  hampers  investment  in 
other regions, which prevents their integration into 
global  value  chains  and  perpetuates  regional 
divergences.  Although  Slovakia  continues 
to 
attract  new  investment  from  foreign  companies, 
the  business 
concerns  about 
environment  persist.  In  addition,  shortages  of 
qualified  labour,  particularly  in  the  Bratislava 
region,  are  increasingly  cited  by  businesses  as  a 
key factor limiting production in both industry and 
the services sector.  

the  quality  of 

the 

2016 

Overall,  Slovakia  has  made limited  progress  in 
country-specific 
addressing 
recommendations. Some progress has been made 
in  a  number  of  policy  areas, 
including  on 
improving  activation  measures  for  the  long-term 
unemployed,  expanding  the  number  of  childcare 
places,  raising  the  attractiveness  of  the  teaching 
profession  through  pay  rises  and  in  improving 
human 
the  public 
administration; limited progress has been achieved 
in  raising  tax  compliance,  improving  the  cost-
effectiveness  of  healthcare, 
including  Roma 
children  in  mainstream  education,  strengthening 
public  procurement  practices,  and  in  making  the 
justice  system  more  effective.  No  progress  was 
made 
and 
addressing 
administrative burden on businesses. 

resource  management 

regulatory 

the 

on 

in 

intensity, 

targets  for 

the  prospective 
rate,  R&D 

Regarding progress in reaching the national targets 
under  the  Europe  2020  strategy,  Slovakia  is 
currently  meeting  —  or  is  on  track  towards 
meeting  — 
the 
renewable 
employment 
energy  use,  energy  efficiency  and  greenhouse  gas 
emissions.  While  a  sufficient  reduction  in  early 
school leaving and the number of people at risk of 
to  be 
poverty  and  social  exclusion  appears 
attainable  by  2020,  both 
indicators  have 
deteriorated  recently  and  more  efforts  are  needed 
to  reach  the  targets.  The  distance  to  the  target  for 
tertiary  education  remains  but  is  progressively 
narrowing. 

1 

 
 
Executive summary 

The  main  findings  of  the  analysis  in  this  report, 
and the related policy challenges, are as follows: 

pronounced,  also  because  of  weak  social  safety 
nets. 

Tax  evasion  and  avoidance  have  fallen,  and 
efforts  are  being  made  to  raise  voluntary 
compliance.  Improvements  in  tax  collection  have 
significantly reduced what was, in the past, a high 
VAT  gap.  Limiting  VAT  fraud  appears  to  have 
also  had  a  positive  impact  on  the  collection  of 
corporate income tax. The financial administration 
retains  a  focus  on  improving  VAT  compliance, 
especially through auditing. At the same time, non-
tax 
audit  activities 
compliance are being explored. 

to  strengthen  voluntary 

Slovakia's  public  finances  still  face  risks  in  the 
long  term.  The  deficit  of  the  public  pension 
system is projected to double in the long term, and 
the retirement age in Slovakia is among the lowest 
in  the  EU.  Recent  adjustments  in  the  pension 
system  have  largely  been  ad  hoc  and  short-term. 
Meanwhile,  increasing  the  cost-effectiveness  of 
healthcare  in  Slovakia  remains  a  challenge.  Some 
steps  have  been  taken  to  rationalise  hospital  care 
and  lower  costs.  Concrete  results  are  not  yet 
visible but are likely to occur following a spending 
review in the sector and better cost benchmarking 
in  procurement  activities.  The  introduction  of  the 
diagnosis-related  groups  system  for  payments  and 
the launching of e-health systems are making only 
slow progress. 

Rapid  job  creation  and  support  measures  for 
low-wage  earners  have  helped  reduce  the 
unemployment  rate,  although  labour  market 
challenges  persist.  Slovakia  has  recently  adopted 
several  active  and  passive  measures  to  tackle  the 
unemployment  of  specific  vulnerable  groups, 
including  an  action  plan  aiming 
to  provide 
personalised  services  and  training  for  the  long-
term unemployed. These measures, if implemented 
in a timely manner, are likely to help reduce long-
term  unemployment,  which  remains  very  high.  
Roma  and  low-skilled  remain  one  of  the  most 
disadvantaged  groups  in  the  labour  market.  The 
adult participation in lifelong learning is low. The 
employment  of  women  is  still  hindered  by  care 
responsibilities. Continuous efforts are being made 
to  improve  access  to  childcare,  but  there  is  still  a 
in 
lack  of  good-quality,  affordable  facilities, 
particular for children under the age of three. The 
risk  of  poverty  or  social  exclusion  remains 
relatively  modest,  but  the  intensity  of  poverty  is 

2 

Although  steps  have  been  taken  to  address 
weaknesses 
in  the  education  and  training 
system,  some  challenges  remain.  Students’ 
performance in basic skills has further deteriorated 
and educational inequalities — both from a socio-
economic  and  ethnic  point  of  view  —  remain 
strong. A reform to support socially and ethnically 
inclusive education entered into force in 2016 but 
effective  implementation  will  require  additional 
effort and political commitment. Initial steps have 
been  taken  to  improve  the  attractiveness  of  the 
teaching  profession  and  Slovakia  is  preparing  a 
reform  at  all  education  levels  in  order  to  enhance 
their quality and labour market relevance. The dual 
vocational 
scheme, 
designed  to  meet  the  needs  of  industry,  is  now  in 
its second year of implementation. 

education 

training 

and 

is 

Public 

persist. 

favourable  but  barriers 

The  overall  outlook  for  public  and  private 
investment 
to 
investment 
infrastructure 
investment,  including  in  the  transport  sector, 
remains  a  high-profile  policy  area.  Existing 
investment  strategies  and  cost-saving  initiatives 
can  help  to  close  gaps  in  Slovakia's  infrastructure 
and  foster  growth  and  convergence  in  the  central 
and  eastern  regions  of  the  country.  However, 
complex  bureaucratic  procedures,  fast-changing 
regulations  and  policies  as  well  as  insolvency 
arrangements  weigh  on  the  business  environment. 
An ineffective justice system and a lack of skilled 
workers are probably also holding back investment 
needed to support growth and convergence. 

Small and medium-sized enterprises can play a 
vital role in Slovakia's economic diversification, 
while  innovation  policy  and  resource  efficiency 
continue 
to  present  challenges.  Slovakia's 
relatively  dynamic  small  and  medium-sized 
enterprises  sector  is  being  granted  greater  policy 
attention,  including  through  a  new  Act  on  the 
promotion  of  small  and  medium-sized  enterprises 
and  an  action  plan  to  support  entrepreneurship. 
Regulated  professions  face  comparatively  high 
restrictions.  Meanwhile,  and  in  spite  of  rising 
R&D  intensity,  Slovakia's  science  base  is  still 
ranked  below  that  of  most  other  Member  States. 
Business R&D spending and cooperation between 
the public sector, research institutions and business 
supporting 
are 

stagnating.  Policy  measures 

 
 
Executive summary 

research  and  innovation  are  not  effective  and 
reforms are proceeding slowly. Finally, Slovakia’s 
energy  efficiency  is  relatively  low  and  energy 
dependence  is  high.  The  electricity  market  is 
blighted  by  distortions  and  hurdles  for  new 
providers. Municipal waste management continues 
to to give cause for concern. 

human 

Sub-optimal 

Slovakia's  public  administration 
is  being 
modernised and the justice system has received 
policy  attention,  but  corruption  remains  a 
challenge. 
resource 
management  in  the  civil  service  is  expected  to 
improve  with  the  new  Civil Service  Act.  To  date, 
public  procurement  practices  fall  short  of  best 
practices  in  many  areas.  Training  measures  are 
being  developed  to  equip  staff  to  run  a  more 
efficient  procurement  system. 
the 
effectiveness  and  the  independence  of  the  justice 
system is still a challenge for Slovakia, but efforts 
are  being  made  to  address  the  shortcomings. 
However, concerns about the independence of the 
judiciary  remain.  Corruption  perceptions  remain 
high  and  act  as  a  major  business  impediment. 
Control  mechanisms  and  the  enforcement  of  anti-
corruption rules still appear inadequate, and policy 
initiatives  on  whistleblowing  and 
letterbox 
companies  may  not  be  enough  to  resolve  the 
problem. 

Improving 

3 

 
 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth 

years, 

recent 

Slovakia’s 

In 
economic 
performance has remained one of the strongest 
in the EU. Real GDP growth accelerated gradually 
from 2013 onwards, reaching 3.8 % in 2015, while 
investment  expenditure  rose  beyond  pre-crisis 
levels  (Graph 1.1).  Rising household  consumption 
has  also been  a  major  contributor  to growth  since 
2014, benefiting from continuous improvements in 
labour  market  conditions.  According 
the 
Commission  winter  2017  forecast,  real  GDP 
growth  slowed  slightly  to  a  still-solid  3.3 %  in 
2016 and is set to remain around 3 % in 2017 and 
to increase to 3.6 % in 2018. 

to 

Graph 1.1: 

Real GDP and its components 

Source: European Commission 

Buoyant  household  spending  and  net  exports 
became the main drivers of economic growth in 
2016. Private consumption growth strengthened to 
a  solid  2.7 %  in  2016,  supported  by  continued 
employment  gains,  robust  real-wage  growth,  easy 
access to credit and high consumer confidence. In 
contrast,  a  pronounced  downturn 
in  public 
investment  linked  to  the  cycle  of  EU  investment 
funding  is  expected  to  have  restrained  growth  in 
2016.  Strong  private  investment,  especially  in  the 
automotive industry, has not fully compensated for 
this  temporary  public  investment  slump.  Imports 
are  projected  to  have  increased  by  less  than 
total 
exports,  also  reflecting 
investment  activity.  As  a  result,  net  exports  are 

the  decline 

in 

forecast  to  have  become  the  largest  contributor  to 
economic expansion in 2016. 

Despite  the  notable  economic  recovery,  real 
economic  convergence  with  more  developed 
Member  States  continued  at  a  rather  modest 
pace. Real GDP per capita on a purchasing power 
basis rose to 77 % of the EU average in 2015 from 
71 % in 2008. However, given the high proportion 
of  foreign  investment  associated  with  significant 
dividend outflows, gross national income (GNI) is 
regarded  as  more  representative  of  household 
purchasing  power.  The  rate  of  convergence 
measured  by  real  GNI  per  capita  has  been 
somewhat  subdued  in  recent  years,  especially 
compared  with  gains  recorded  before  the  start  of 
the  financial  crisis.  It  stood  at  75 %  of  the  EU 
average in 2015 (Graph 1.2). 

Graph 1.2:  GNI per capita (in PPP, EU28 = 100) 

Source: European Commission 

Household consumption 

Private consumption is projected to become the 
main  driver  of  growth  in  the  coming  years, 
mirroring  a  continued  increase  in  employment 
and real wages. With energy prices set to remain 
low  and  only  a  gradual  increase  in  overall 
consumer  prices  in  2017,  household  budgets  are 
expected  to  benefit.  The  household  saving  rate  is 
likely  to  have  peaked  in  2016  and  to  decline 
real 
thereafter,  allowing  gains 
gradually 
disposable  income  to  feed  through  to  household 
spending.  Low  interest  rates  are  likely  to  help 

in 

4 

708090100110120130Q1-08Q3-08Q1-09Q3-09Q1-10Q3-10Q1-11Q3-11Q1-12Q3-12Q1-13Q3-13Q1-14Q3-14Q1-15Q3-15Q1-16Q3-16Index (Q12008=100)GDPPrivate consumptionGovernment consumptionInvestment40%50%60%70%80%90%199519961997199819992000200120022003200420052006200720082009201020112012201320142015Czech RepublicHungaryPolandSlovakia 
 
 
 
1. Economic situation and outlook 

pronounced  regional  divide  in  the  country. 
Regions around Bratislava have benefited strongly 
from  the  economic  recovery  in  recent  years, 
experiencing  a  significant  improvement  in  labour 
market conditions along with booming investment 
in the automotive industry. In contrast, the eastern 
part of the country has been left somewhat behind. 
Poor  transport  infrastructure  is  one  of  the  main 
reasons  why  the  central  and  eastern  regions  have 
failed to attract foreign investors during the recent 
recovery.  Meanwhile,  Slovakia’s  overall  capital 
stock  remains  well  below 
the  EU  average. 
Investment  expenditure  accounted  for  more  than 
26 %  of  real  GDP  before  the  crisis,  but  averaged 
less  than  22 %  between  2012  and  2016  (see 
Investment Box in Section 3.3). Income disparities 
within  the  country  remained  pronounced,  with 
GDP per capita in the Bratislava region more than 
three  times  higher  than  in  the  eastern  region  in 
2014 (Graph 1.4). 

Graph 1.4: 

Regional GDP per capita (EUR; 2014) 

flows  and 

accelerate  household  credit 
fuel 
consumption  expenditure.  Growth  in  household 
expenditure  is  forecast  to  peak  at  around  3 %  in 
2017 and to slow slightly in 2018, as accelerating 
consumer  price  inflation  acts  as  a  brake  on  real 
disposable income growth. Private consumption is 
set  to  keep  GDP  growth  solid,  given  that  it 
accounts for more than half of economic output. 

Investment 

Both  private  and  public  investment  is  set  to 
intensify  from  2017  onwards,  with  foreign 
direct  investment  playing  an  important  role. 
After a sharp decline in public investment activity 
in  2016,  which  was  unlikely  to  be  offset  fully  by 
investment  growth,  overall 
continued  private 
investment  is  set  to  return  to  growth  in  2017, 
accelerating  further  in  2018.  Buoyant  investment 
in the car industry and a rise in public investment 
spending,  including  large  infrastructure  projects 
such  as  the  Bratislava  ring  road,  bolster  the 
outlook.  Owing  to  the  high  import  intensity  of 
Slovak investment (particularly in machinery), the 
outlook  for  imports  is  strongly  shaped  by  the 
investment  profile  (Graph 1.3).  At  the  same  time, 
high  dependence  on  foreign  investment  and  the 
strong specialisation in the automotive sector leave 
the  Slovak  economy  exposed  to  global  economic 
fluctuations. 

Graph 1.3: 

Investment 

Source: European Commission 

Exports and imports 

surge 

substantial 

The  contribution  of  net  exports  to  economic 
growth  is  expected  to  moderate  in  the  coming 
years,  reflecting  a 
in 
investment  activity  in  2017.  Given  the  high 
import  intensity  of  Slovak  investment  and  the 
projected  return  of  robust  investment  growth,  net 
exports are expected to be little more than neutral 
in terms of their GDP growth contribution in 2017. 
Export  growth  is  set  to  increase  gradually  in  line 
with  a  recovery  in  external  demand,  following 

Source: European Commission 

The  uneven  geographical  spread  of  private 
the 
investment 

exacerbates 

spending 

5 

60708090100110120130Q1-08Q3-08Q1-09Q3-09Q1-10Q3-10Q1-11Q3-11Q1-12Q3-12Q1-13Q3-13Q1-14Q3-14Q1-15Q3-15Q1-16Q3-16Index (2008Q1 = 100)Total investmentOther constructionMachinery33,90013,10011,0009,60005,00010,00015,00020,00025,00030,00035,00040,000BratislavaregionWesternSlovakiaCentralSlovakiaEasternSlovakia 
 
 
1. Economic situation and outlook 

Graph 1.6: 

Unemployment and activity rates 

Source: European Commission 

the 

labour  market 

The  unemployment  rate  is  expected  to  keep 
falling  along  with  a  gradual  increase  in  the 
activity rate. Robust economic recovery and solid 
wage  growth  will  help  bring 
long-term 
unemployed  back  into  the  labour  market.  The 
is  also 
progressive 
mirrored  in  greater  inflows  of  foreign  workers 
from the EU and from non-EU countries, although 
foreign 
low  as  an  overall 
proportion  of  total  employment.  Labour  shortages 
reported  by  employers  have  increased  across 
sectors (Graph 1.7) and are arguably becoming one 
of  the  main  barriers  to  investment  and  economic 
growth. 

tightening 

remains 

labour 

is 

in 

particular, 

Long-term  unemployment  remains  a  major 
challenge,  reflecting  pronounced  geographical 
differences  in  labour  market  conditions  along 
with  low  internal  labour  mobility.  Long-term 
unemployment, 
unevenly 
distributed  across  the  country,  with  significantly 
higher rates in the east, which did not benefit from 
the  economic  recovery  as  much  as  the  regions 
around Bratislava. The labour market participation 
of  underrepresented  groups, 
including  Roma, 
young people, women with young children and the 
low-skilled,  remains  limited.  The  situation  of  the 
Roma is particularly unfavourable, with high rates 
of 
inactivity.  Female 
and 
employment  is  well  below  the  EU  average  in 
Slovakia,  where  motherhood  has  one  of  the 
strongest  impacts  on  career  progression.  Social 
safety nets continue to be rather weak, particularly 

unemployment 

is  expected 

their  joint  slowdown  in  2016.  Moreover,  the  real 
effective  exchange  rate  depreciation  observed 
since  2015 
to  boost  export 
performance,  as  Slovak  products  become  more 
affordable  on  foreign  markets  (Graph 1.5).  A 
continued fall in domestic energy prices combined 
with  a  continued  decline  in  producer  prices  is 
expected  to  make  prices  more  competitive  in  the 
medium  term.  Expanding  car  production  in  new 
and  upgraded  facilities  is  projected  to  lend  a 
further boost to (net) exports and real GDP growth 
in 2018. 

Graph 1.5: 

Exports and real effective exchange rate 
(REER) 

Source: European Commission 

Labour market and social developments 

a 

continued  decline 

Labour  market  conditions  are  set  to  improve 
in 
further,  with 
unemployment  and  gradual  increases  in  the 
activity  rate.  The  annual  unemployment  rate  fell 
below 10 %  in 2016,  for  the first  time  since  2008 
and  the  second  time  since  1995.  The  activity  rate 
increased  to  77.2 %  in  Q3-2016  surpassing  even 
the  years  of  buoyant  economic  expansion  before 
the  financial  crisis  (Graph 1.6).  Recent  sharp 
declines  in  unemployment  point  to  a  tightening 
labour market, which is likely to drive up nominal 
wages. With  regard  to  emerging  labour  shortages, 
especially  in  the  Western  region,  nominal  wage 
growth is projected to steadily strengthen to 4.2 % 
in  2018.  Despite  subdued  inflation,  real  wage 
growth  is  expected  to  remain  below  real  GDP 
dynamics. 

6 

-30-25-20-15-10-50510152025Q1-08Q3-08Q1-09Q3-09Q1-10Q3-10Q1-11Q3-11Q1-12Q3-12Q1-13Q3-13Q1-14Q3-14Q1-15Q3-15Q1-16Q3-16% change (y-o-y)ExportsREER74.57575.57676.57777.58910111213141516Q1-08Q3-08Q1-09Q3-09Q1-10Q3-10Q1-11Q3-11Q1-12Q3-12Q1-13Q3-13Q1-14Q3-14Q1-15Q3-15Q1-16Q3-16%% Unemployment (15-74 yrs, lhs)Activity (20-64 yrs, rhs) 
 
 
1. Economic situation and outlook 

progressivity of labour taxation and relatively low 
social  protection  expenditure.  Despite  these  low 
levels  of  income  inequality,  the  Roma  population 
remains  marginalised,  with  poor  education  and 
stark 
employment 
socioeconomic 
country. 
Slovakia also shows a very low level of net wealth 
inequality, with the distribution of net wealth being 
one of the most even in the euro area in 2014. (4) 

demonstrating 

inequalities 

outcomes 

the 

in 

Inflation 

Inflation  is set  to  increase gradually, driven  by 
rapid  rises  in  the  prices  of  food  and  services, 
while the decline in energy prices is expected to 
continue  in  2017.  Consumer  prices  dropped  for 
the third year in a row in 2016, this time by -0.5 % 
(Graph 1.8).  Falling  energy  and  food  prices 
prevailed  over  moderate  increases  in  the  price  of 
services.  Energy  prices  are  expected  to  continue 
their  year-on-year  decline  in  2017  owing  to  a 
reduction  in  regulated  electricity  and  gas  prices. 
This  should,  however,  be  outweighed  by  the 
increased  cost  of  services  and  renewed  growth  in 
food  and  fuel  prices.  Headline  annual  inflation  is 
set  to  turn  positive  in  2017,  rising  to  almost  1 %. 
Consumer  prices  are  set  to  increase  gradually 
thereafter,  reflecting  continued  solid  consumer 
spending. 

(4)  The  Eurosystem  Household  Finance  and  Consumption 

Survey, ECB 2016 

for  the  unemployed  and  families  with  children. 
The risk of poverty or social exclusion is relatively 
modest, but the intensity of poverty is pronounced. 

Graph 1.7: 

Labour shortages (% of respondents) 

Note: Percentages show share of business survey 
respondents citing labour shortage as limiting factor on 
production; composite indicator is a gross value added-
weighted average of industry and services series 
Source: European Commission 

Slovakia  has  one  of  the  lowest  levels  of  income 
inequality  in  the  EU.  The  incomes  of  the  richest 
20 %  of  the  population  are  less  than  four  times 
higher  than  the  incomes  of  the  poorest  20 %. (1) 
This  ratio  decreased  from  3.9  in  2012  to  3.5  in 
2015.  Low  income  inequality  in  Slovakia  can  be 
explained  by  relatively  equally  distributed  market 
incomes,  in  particular  the  absence  of  very  high 
earners  at  the  top  of  the  income  distribution. (2) 
However, at the bottom end of the distribution, the 
low-income  households  has 
proportion  of 
eroded. (3)  The  small  difference  between  market 
and  disposable  income  inequalities  indicates  that 
the  tax  and  benefit  system  in  Slovakia  does  not 
play a considerable role in redistributing incomes. 
This  can  be  explained  by  the  low  degree  of 

(1)  As  measured  by 
(S80 /S20  ratio). 

the 

income  quintile  share 

ratio 

(2)  The  S90 /S50   indicator,  which  measures  the  ratio  of 
income of the top 10 % of households to the bottom 50 %, 
was 57 for Slovakia in the 2015 EU-SILC data, the lowest 
in the EU. This indicates an absence of very high earners in 
the Slovak labour market. 

(3)  The  S50 /S10   indicator,  which  measures  the  ratio  of 
income  of  the  bottom  50 %  of  households  to  the  bottom 
10 %, rose substantially from 2012 to 2015. This indicates 
that the relative income situation of the poorest households 
in Slovakia has been worsening. 

7 

02468101214161820Q1-04Q4-04Q3-05Q2-06Q1-07Q4-07Q3-08Q2-09Q1-10Q4-10Q3-11Q2-12Q1-13Q4-13Q3-14Q2-15Q1-16Q4-16IndustryServicesComposite 
 
                                                           
                                                           
Graph 1.8: 

Inflation (y-o-y in %) 

Source: European Commission 

Financial sector 

low 

Private  sector  credit  growth  continued  to 
increase,  contributing  to  an  upward  trend  in 
the  private  sector  debt  ratio.  The  gross  debt-to-
income  ratio  of  households  increased  steadily  in 
recent  years,  reaching  almost  60%  in  2016,  thus 
approaching  Slovakia's  economic  peers.  Having 
grown  at  a double-digit  pace  since  2010,  lending 
for  house  purchases  remained  buoyant  in  2016, 
fuelled  by 
(Graph 1.9). 
interest 
Household  indebtedness  remains  far  below  euro 
area  averages  but  broadly  in  line  with  Visegrád 
peers.  The  annual  growth  rate  of  credit  to  non-
financial  corporations  remained  close  to  2%  on 
average  in  2016,  despite  solid  economic  growth 
and high capacity utilisation that suggest increased 
scope  for  investment.  The  total  liabilities  of  the 
increased  by  6.4%  between 
financial  sector 
November  2015  and  2016,  with 
largely 
foreign-owned  banking  sector  remaining  well-
capitalised. (5) 

rates 

the 

Overall lending costs continued to ease, but the 
low interest rate environment exerts downward 
pressure  on  banks'  profitability.  The  average 
cost of borrowing for household mortgage lending 
and 
to  non-financial  corporations 
continued  declining  throughout  2016,  reaching 

loans 

for 

(5)  Data  source:  ECB;  annual  growth  rates  calculated  as  the 
difference  in  outstanding  amounts  adjusted  for  all  non-
transaction 
revaluations, 
issues, 
reclassifications, and exchange rate adjustments. 

related 

i.e. 

1. Economic situation and outlook 

respectively 

1.9 %  and  2.6 % 
in  November 
2016. (6)  According  to  the  National  Bank  of 
Slovakia,  the  downward  trend  in  net  interest 
incomes  harmed  banking  profitability,  which  is 
expected  to  fall  in  2017.  Overall  profits  of  banks 
rose by 6 % y-o-y in September 2016, but declined 
by 8 % after deduction of non-recurring revenues. 
Banks'  interest  income  may  be  further  squeezed 
due to the Slovak National Bank's imposition of a 
1 %  ceiling  on  fees  for  early  repayments  of 
housing loans.  

Graph 1.9: 

Loans to sectors (y-o-y in %) 

Source: ECB, European Commission 

(6)  Data source: ECB Statistical Data Warehouse; (composite) 

cost of borrowing indicators. 

8 

-2%-1%0%1%2%3%4%5%Jan-11Apr-11Jul-11Oct-11Jan-12Apr-12Jul-12Oct-12Jan-13Apr-13Jul-13Oct-13Jan-14Apr-14Jul-14Oct-14Jan-15Apr-15Jul-15Oct-15Jan-16Apr-16Jul-16Oct-16Unprocessed foodServicesProcessed foodNon-energy industrial goodsEnergyAll-items HICP-10%-5%0%5%10%15%20%Jan-10Jun-10Nov-10Apr-11Sep-11Feb-12Jul-12Dec-12May-13Oct-13Mar-14Aug-14Jan-15Jun-15Nov-15Apr-16Sep-16Total loansLoans to NFCLoans to HHLending for house purchase 
 
                                                           
 
 
                                                           
1. Economic situation and outlook 

The  consolidation  effort  in  2017,  which  comes 
exclusively  from  the  revenue  side,  is  expected  to 
reduce the deficit to 1.4 % of GDP. A shortfall in 
revenue  as  a  result  of  the  reduction  of  the 
corporate  income  tax  rate  to  21%  and  increasing 
lump-sum  deductions  for  the  self-employed  are 
more  than  compensated  for  by  other  measures, 
including  a  higher  levy  on  regulated  businesses, 
higher  tobacco  duties  and  a  new  levy  on  non-life 
insurance policies. The bank levy, which had been 
expected to expire, has also been retained for 2017. 
Additional 
to  become 
available  from  the  removal  of  the  ceiling  rate  on 
healthcare  contributions  and  the  marked  increase 
of the ceiling rate on social contributions for high-
income  earners 
the 
Parliament.  Assuming  that  there  are  no  policy 
changes other than the introduction of a 7 % tax on 
dividends,  the  government  deficit  is  set  to  fall  to 
0.6 % of GDP in 2018, mainly due to buoyant tax 
robust  economic 
revenues 
expansion.  The  debt-to-GDP  ratio  is  about  to 
revert to a downward trend, and is expected to fall 
to 50 % in 2018. 

that  were  approved  by 

in  conditions  of 

is  expected 

revenue 

Graph 1.10:  House prices 

Source: National Bank of Slovakia 

in 

After  bottoming  out  in  2014,  house  prices 
surpassed their pre-crisis levels in 2016. Annual 
growth  in  property  prices  increased  to  5.8 %  in 
Q4-2016  (Graph 1.10),  driven  mainly  by  stronger 
demand 
the  Bratislava  region.  Significant 
regional  differences  in  property  prices  and  rents 
persist, with both growing rapidly in Bratislava but 
only  marginally  in  the  rest  of  the  country.  Rising 
real-estate  prices  increase  incentives  for  both 
residential  and  infrastructure  investment  in  the 
area,  but  may  also  exacerbate 
the  already 
pronounced regional divide. Rising rents in regions 
with higher economic activity also reduce internal 
labour  mobility,  especially  from  the  Central  and 
Eastern  part  of  the  country,  where  long-term 
unemployment  is  the  most  pressing  economic 
issue. 

Public finances 

The  general  government  deficit  is  expected  to 
decline  gradually,  mainly  due  to  higher  tax 
revenues. The deficit is expected to have receded 
to  2.2 %  of  GDP  in  2016  thanks  to  robust 
corporate  income  tax  receipts  reflecting  rising 
profitability, and steady growth in personal income 
taxes  and  social  contributions  on  the  back  of 
favourable 
labour  market  developments.  The 
narrowing  of  the  deficit  would  have  been  even 
more pronounced had it not been for non-budgeted 
spending  (e.g.  on  financial  corrections  related  to 
EU  funds)  and  higher-than-budgeted  investment 
expenditure. 

9 

-20.0%-15.0%-10.0%-5.0%0.0%5.0%10.0%€1 100€1 150€1 200€1 250€1 300€1 350€1 400€1 450Q1-09Q3-09Q1-10Q3-10Q1-11Q3-11Q1-12Q3-12Q1-13Q3-13Q1-14Q3-14Q1-15Q3-15Q1-16Q3-16Price level (€/m2)Price (y-o-y, rhs) 
 
1. Economic situation and outlook 

Table 1.1: 

Key economic, financial and social indicators - Slovakia 

(1) Sum of portfolio debt instruments, other investment and reserve assets 
(2,3) domestic banking groups and stand-alone banks. 
(4) domestic banking groups and stand-alone banks, foreign (EU and non-EU) controlled subsidiaries and foreign (EU and 
non-EU) controlled branches. 
(*) Indicates BPM5 and/or ESA95 
Source: European Commission,  ECB 

10 

2004-20082009201020112012201320142015201620172018Real GDP (y-o-y)7.4-5.45.02.81.71.52.63.83.32.93.6Private consumption (y-o-y)7.1-0.50.4-0.6-0.4-0.81.42.22.72.92.8Public consumption (y-o-y)4.06.21.7-1.8-2.12.25.35.42.92.93.0Gross fixed capital formation (y-o-y)8.2-18.77.212.7-9.0-0.91.216.9-7.32.15.4Exports of goods and services (y-o-y)14.9-16.815.712.09.36.73.77.04.15.16.6Imports of goods and services (y-o-y) 13.9-18.814.79.62.55.64.48.12.25.16.5Output gap3.1-2.0-0.5-1.1-2.0-2.7-2.1-1.1-0.3-0.10.4Potential growth (y-o-y)5.53.53.43.52.62.22.02.82.52.73.1Contribution to GDP growth:Domestic demand (y-o-y)6.3-4.02.22.1-2.8-0.22.05.70.42.63.2Inventories (y-o-y)0.7-3.62.4-1.0-1.30.61.1-1.11.10.10.0Net exports (y-o-y)0.42.10.51.75.71.2-0.5-0.71.90.20.4Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.40.70.60.60.50.30.40.50.60.70.7Capital accumulation (y-o-y)1.40.30.50.80.20.0-0.10.60.10.20.4Total factor productivity (y-o-y)3.72.52.32.01.91.81.71.71.71.81.9Current account balance (% of GDP), balance of payments-7.0-3.4-4.7-5.00.91.81.20.2...Trade balance (% of GDP), balance of payments-2.7-1.0-1.1-0.44.04.53.92.8...Terms of trade of goods and services (y-o-y)-0.9-1.1-0.6-1.3-1.2-0.50.0-0.3-0.10.00.0Capital account balance (% of GDP)0.40.81.51.31.91.41.03.5...Net international investment position (% of GDP)-49.0-66.5-61.9-64.4-61.4-62.3-63.8-61.0...Net marketable external debt (% of GDP) (1)-1.1*-10.9*-10.1*-11.7*-10.1*-12.8-16.5-17.5...Gross marketable external debt (% of GDP) (1)42.461.561.860.757.864.872.768.0...Export performance vs. advanced countries (% change over 5 years)78.0*18.812.46.20.55.110.08.93...Export market share, goods and services (y-o-y)4.4-7.2-4.63.01.04.9-1.6-0.6...Net FDI flows (% of GDP)-5.41.0-0.9-2.8-3.20.30.60.0...Savings rate of households (net saving as percentage of net disposable income)0.92.32.40.80.70.21.43.1...Private credit flow, consolidated (% of GDP)7.83.12.93.03.15.25.78.3...Private sector debt, consolidated (% of GDP)54.669.367.570.370.674.177.681.5...of which household debt, consolidated (% of GDP)14.723.724.826.427.729.632.234.7...of which non-financial corporate debt, consolidated (% of GDP)39.945.642.743.942.944.545.446.8...Corporations, net lending (+) or net borrowing (-) (% of GDP)-2.75.24.01.36.76.74.34.00.80.70.3Corporations, gross operating surplus (% of GDP)27.324.526.626.426.826.625.625.225.024.924.8Households, net lending (+) or net borrowing (-) (% of GDP)-1.50.10.4-0.9-0.4-0.90.01.01.61.11.0Deflated house price index (y-o-y)19.3-12.8-5.0-5.2-5.9-0.41.55.5...Residential investment (% of GDP)2.73.02.62.42.32.72.62.3...GDP deflator (y-o-y)3.0-1.20.51.61.30.5-0.2-0.2-0.20.91.5Harmonised index of consumer prices (HICP, y-o-y)4.10.90.74.13.71.5-0.1-0.3-0.50.91.4Nominal compensation per employee (y-o-y)8.12.65.42.02.62.61.83.11.53.84.2Labour productivity (real, person employed, y-o-y)5.5-3.56.71.01.62.31.11.8...Unit labour costs (ULC, whole economy, y-o-y)2.46.3-1.11.01.00.30.71.30.82.32.1Real unit labour costs (y-o-y)-0.57.6-1.6-0.7-0.3-0.20.91.51.11.30.6Real effective exchange rate (ULC, y-o-y)6.68.8-3.20.3-1.90.30.1-0.70.41.20.3Real effective exchange rate (HICP, y-o-y)7.16.9-4.21.00.10.90.2-1.70.4-1.6.Tax rate for a single person earning the average wage (%)22.221.421.522.922.822.822.923.1...Tax rate for a single person earning 50% of the average wage (%)14.5*12.913.115.915.715.716.014.4...Total Financial sector liabilities, non-consolidated (y-o-y)7.26.23.50.41.93.15.18.4...Tier 1 ratio (%) (2).20.919.216.916.317.316.617.4...Return on equity (%) (3).6.78.6-0.85.76.75.26.6...Gross non-performing debt (% of total debt instruments and total loans and advances) (4).3.53.943.83.84.13.5...Unemployment rate13.812.114.513.714.014.213.211.59.79.07.9Long-term unemployment rate (% of active population)9.96.69.39.39.410.09.37.6...Youth unemployment rate (% of active population in the same age group)26.127.633.933.734.033.729.726.522.3..Activity rate (15-64 year-olds)68.968.468.768.769.469.970.370.9...People at risk of poverty or social exclusion (% total population)25.219.620.620.620.519.818.418.4...Persons living in households with very low work intensity (% of total population aged below 60)6.15.67.97.77.27.67.17.1...General government balance (% of GDP)-2.6-7.8-7.5-4.3-4.3-2.7-2.7-2.7-2.2-1.4-0.6Tax-to-GDP ratio (%)30.228.928.228.828.430.331.332.432.833.333.5Structural budget balance (% of GDP)..-7.1-4.2-3.6-1.7-2.2-2.3-2.1-1.3-0.8General government gross debt (% of GDP)32.635.940.743.252.254.753.652.552.151.850.0forecast 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

Progress  with  implementing  the  recommendations 
addressed  to  Slovakia  in  2016  has  to  be  seen  as 
part  of  a  process  which  started  with 
the 
introduction  of  the  European  Semester  in  2011. 
Slovakia's  track  record  since  2011  in  formulating 
policies  to  address  the  CSRs  and  underlying 
structural problems shows a mix of policy progress 
and persistent challenges.  

The  country  has  made  headway  in  improving  tax 
compliance,  combatting  tax  fraud  and  reforming 
its pension system. Labour market challenges have 
persisted  for  many  years,  partly  also  due  to  the 
high  initial  rate  of  unemployment  that  started  to 
decline  gradually  in  2014  and  2015.  Targeting 
long-term  unemployed  and 
support 
vulnerable  groups  has  been  on  the  government's 
agenda  for  a  number  of  years,  but  progress  until 
the  end  of  2016  appears  somewhat  limited.  Very 
little progress has been made in tackling low Roma 
participation in the labour market.  

the 

for 

Certain  measures  were  taken  to  better  include 
Roma  children  in  mainstream  education,  but 
effective 
implementation  of  already  enacted 
legislation  is  still  required.  The  lack  of  adequate 
childcare  facilities  for  children  under  three  has 
hampered  mothers’  return  to  the  labour  market,  
although there is evidence of some progress in the 
provision of childcare for older children.  

For  a  number  of  years  an 
inefficient  and 
justice 
ineffective  public  administration  and 
system  have  been  shaping  —  and  harming  —  the 
business environment. Efforts to tackle corruption 
recent  years.  Public 
have  been 
in 
limited 
long-
procurement  has  been  suffering 
standing  deficiencies,  which  can 
to  a 
misallocation of public resources. 

from 
lead 

Overall,  Slovakia  is  considered  to  have  made 
limited  progress  in  addressing  the  2016  CSRs. 
The  2016  country-specific 
recommendations 
(CSRs)  that  were  addressed  to  the  country  by  the 
Council in June 2016 were focused on three broad 
themes: 
long-term 
finances 
sustainability, 
labour  market  and  education 
challenges, and public administration issues. Each 
of these is assessed in turn below.  

public 

and 

notably, 

cost-effective; 

have  been  taken  towards  making  the  healthcare 
system  more 
a 
comprehensive  spending  review  has  identified 
large potential cost savings. The targeted gains are 
ambitious in scope and require concrete follow-up 
with  specific  measures.  Limited  progress  has  also 
been  made  in  improving  tax  compliance.  While 
some  measures  have  been  launched  and  appear 
promising,  the  system  is,  on  the  whole,  highly 
focused  on  control,  with  comparatively 
less 
attention paid to fostering voluntary compliance. 

and 

labour  market 

Slovakia  has  made  some  progress  in  addressing 
the 
education-related 
recommendation (CSR 2). Some progress has been 
achieved  in  improving  activation  measures.  An 
action  plan  for  the  integration  of  the  long-term 
unemployed  and  other  disadvantaged  groups  was 
adopted in late 2016 to address the current lack of 
individualized  services  and  training.  However,  no 
targeted  efforts  have  been  made  to  help  integrate 
Roma into the labour market. There is evidence of 
some progress in increasing the availability of and 
access  to  early  childhood  education  and  care. 
Some  progress  has  also  been  made  in  raising  the 
attractiveness  of  the  teaching  profession.  Annual 
pay rises have been agreed or are planned for 2016 
and  2017.  A  reform  to  support  socially  and 
ethnically inclusive education, including for Roma 
pupils,  entered  into  force  in  2016  but will  require 
more sustained effort and political commitment.  

Slovakia has made limited progress in addressing 
the  recommendations  on  public  administration 
issues (CSR 3). Limited progress has been made in 
improving competition and tackling illicit practices 
in  public  procurement.  Some  progress  has  been 
made  on  improving  human  resource  management 
in public administration following the adoption of 
represents  a 
the  Civil  Service  Act,  which 
towards 
potentially 
professionalising  the  civil  service  and  removing 
strong  political  ties  within  the  system.  Limited 
progress  has  been  made  towards  improving  the 
effectiveness  of  the  justice  system.  No  progress 
has been made on adopting a comprehensive plan 
to  address 
the  administrative  and  regulatory 
barriers  facing  businesses,  as  a  long-term  strategy 
is yet to be formulated.  

important 

step 

Slovakia has made limited progress in addressing 
the  fiscal  recommendation  (CSR 1).  Some  steps 

11 

 
 
 
2. Progress with country-specific recommendations 

Table 2.1: 

Summary table on 2016 CSR assessment 

* This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact 
Source: European Commission 

12 

Slovakia Overall assessment of progress with 2016 CSRs:  Limited progress CSR 1: Achieve an annual fiscal adjustment of 0,25 % of GDP towards the medium-term budgetary objective in 2016 and of 0,5 % of GDP in 2017. Improve the cost-effectiveness of the healthcare system. Take measures to increase tax compliance.  Limited progress*  Limited progress in generating cost-savings in the healthcare sector  Limited progress in improving tax compliance, particularly regarding voluntary compliance.  CSR 2: Improve activation measures for the long-term unemployed and other disadvantaged groups, including individualised services and targeted training. Facilitate the employment of women, in particular by extending the provision of affordable, quality childcare. Improve educational outcomes by making the teaching profession more attractive and by increasing the participation of Roma children from early childhood in mainstream education.  Some progress  Some progress has been made in improving activation measures, including through the adoption of an action plan on long-term unemployment.  No targeted efforts have been taken to help integrate Roma into the labour market.  Some progress has been evident in increasing the capacity of and access to early childhood education and care, particularly for the over-threes.  Some progress has been made in raising the attractiveness of the teaching profession, particularly through pay rises.  Limited progress has been made increasing the participation of Roma children in mainstream education.  CSR 3: Consolidate governance, reinforce the shift from price only to quality-based competition and improve the prosecution of illicit practices in public procurement. Improve the transparency, quality and effectiveness of human resources management in public administration, in particular by adopting a new civil service act, and the effectiveness of the justice system. Adopt a comprehensive plan to address administrative and regulatory barriers for businesses. Limited progress  Limited progress has been made in improving competition and fighting illicit practices in public procurement.  Some progress has been made in improving human resource management in public administration through the adoption of the Civil Service Act.   Limited progress has been made towards improving the effectiveness of the justice system.   No progress has been made on adopting a comprehensive plan to address administrative and regulatory barriers for businesses.   
 
 
 
 
2. Progress with country-specific recommendations 

13 

 Box 2.1: Contribution of the EU budget to structural change in Slovakia Slovakia is a major beneficiary of the European Structural and Investment Funds (ESI Funds) in that it may receive up to EUR 15.3 billion by 2020. This is equivalent to around 2.6% of GDP annually (over 2014-2017) and 55% of national public investment1. 553 million of EU financing is planned to be delivered via financial instruments (a doubling from 2007-2013)2. By 31 December 2016, an estimated EUR 3 billion, which represents about 20 % of the total allocation for ESI Funds, have already been allocated to concrete projects. The contribution of the ESI Funds to the development of public investment is discussed in Section 3.3.  Financing under the European Fund for Strategic Investments, Horizon 2020, the Connecting Europe Facility and other directly managed EU funds is additional to the ESI Funds. By end 2016, Slovakia has signed agreements for EUR 552 million for projects under the Connecting Europe Facility. The EIB  Group approved financing under EFSI amounts to nearly EUR 457 million, which is expected to trigger EUR 1.1  billion in total investment (as of end 2016).  ESI Funds supported progress on a number of structural reforms in 2015 and 2016 via ex-ante conditionalities3 and targeted investment. Examples include the timely transposition of the EIA directive in the amended Water Act and the development of the transport plan, which has facilitated the preparation of realistic and mature road and railway projects. These reforms have prepared the ground for better implementation of public investment projects in general, including those financed from national sources and from the other EU instruments mentioned above. The fulfilment of ex-ante conditionalities is on track, except for in research, technological development and innovation.  Support for administrative reforms is also available through targeted financing under the European Social Fund, advice from the Structural Reform Support Service and, indirectly, through technical assistance.   Relevant CSRs focusing on structural issues informed the design of the 2014-2020 programmes. These include activities aiming at strengthening the administrative capacity of authorities dealing with ESI Funds, improving the energy efficiency of public and residential buildings, and promoting cooperation between academia, research and the business sector. The latter is done by supporting research and development activities in enterprises, transfer of high value-added technology, and implementing innovation measures. Some 90 % of programmed ESF allocations are dedicated to addressing CSRs, such as on long term unemployment through a comprehensive ESF-funded action plan introducing personalised support to jobseekers, enhancing the accessibility of quality childcare facilities, and improving educational outcomes and the inclusion of Roma in mainstream education. ESF projects have contributed to the reform of vocational education and training, the reorganisation of public employment services, the provision of childcare at the workplace, and activities aimed at preparing Roma children for primary school. The Youth Employment Initiative has helped reduce the high youth unemployment rate. Other measures aim at lowering the regulatory and administrative burden on businesses and promoting high standards of transparency, integrity and accountability in public administration, as well as fighting corruption.    In addition to challenges identified in past CSRs, the ESI Funds address other structural obstacles to growth and competitiveness. They support infrastructure investments by increasing the coverage of fast broadband (target: 50% of additional households in 2023), improving Slovakia's transport network through 606 km of reconstructed or modernised roads and 111 km of railway lines, and enhancing the competitiveness of aquaculture and the processing sector by modernising and diversifying production and increasing productivity via renovation and construction of new farms and processing facilities. Moreover, 14 070 enterprises will carry out investments drawing mainly on non-financial support, as well as via innovation and private investment.   https://cohesiondata.ec.europa.eu/countries/SK                                                              1 National public investment is defined as gross capital formation + investment grants + national expenditure on agriculture and fisheries. 2 JEREMIE – EUR 119 million; JESSICA – EUR 208 million. 3 Before programmes are adopted, Member States are required to comply with a number of ex-ante conditionalities, which aim at improving framework and conditions for the majority of public investments areas. For Members States that did not fulfil all the ex-ante conditionalities by the end 2016, the Commission has the possibility to propose the temporary suspension of all or part of interim payments.  
 
 
 
 
 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

Tax administration and tax policies 

The tax-to-GDP ratio is on the rise but remains 
relatively  low  compared  to  other  EU  Member 
States’.  Taxes  as  a  proportion  of  GDP  increased 
by 4 pps from 2010 to around 32 % in 2015. Social 
contributions are the biggest source of tax revenue 
(43 %  of  total  tax  revenues  in  2015)  followed  by 
taxes on production and imports (34 %). The latter 
are — in terms of GDP — relatively low compared 
to other Member States’. 

(CASE, 

Improving 
tax  collection  has  significantly 
reduced  Slovakia’s  high  VAT  gap. (7)  In  2014, 
the VAT gap was some 7 pps lower than in 2012. 
Nevertheless,  at  30 %,  it  remains  one  of  the 
highest  in  the  EU  and  more  than  double  the  EU 
average,  indicating  an  ongoing  VAT  compliance 
challenge 
continued 
improvement  in  VAT  collection  since  2012  is  the 
result  of  several  measures,  not  least  the  VAT 
control  statement.  The  Ministry  of  Finance 
estimates  that  the  effective  VAT  rate  increased  to 
14.9 %  in  the  second  quarter  of  2016,  up  from 
12 %  in  2012  (Graph  3.1.1),  yielding  additional 
revenue  equivalent  to  0.9 %  of  GDP  in  2015 
compared to 2012. 

2016).  The 

improved 

There  are  indications  that  limiting  VAT  fraud 
has also had a positive impact on the collection 
of corporate income tax (CIT). Estimates by the 
Ministry of Finance suggest that effective tax rates 
for  VAT  and  CIT 
in  parallel 
(Graph 3.1.1),  and  CIT  revenues  improved  even 
when  netting  out  the  impact  of  other  legislative 
changes  in  the  area  of  corporate  income  taxation. 
The  minimum  CIT  introduced  in  2014,  which 
aimed  to  tackle  the  relatively  high  level  of  CIT 
non-compliance,  has  brought  rapid  results. (8) 
tax 
to  scrap 
However,  plans 
arrangements 
tax 
in  2018  mean 
administration’s capacity will need to be bolstered 
to stop CIT compliance from falling again (Remeta 
et al., 2015; IBFD News, 2016). 

the  minimum 
the 
that 

(7)  The  VAT  gap  is  defined  as  the  difference  between  the 
amount  of  VAT  collected  and  the  VAT  total  tax  liability 
(the theoretical tax liability according to tax law). 

(8)  The  percentage  of  companies  with  zero  corporate  income 
tax liability declined from 59 % in 2013 to 9 % in 2014 and 
then to 6 % in 2015. 

Efforts have been made recently to improve the 
quality of services to taxpayers. Paying taxes has 
been  further  facilitated  by  the  introduction  of 
electronic  filing  and  payments  for  VAT.  The 
number  of  tax  payments  was  reduced  from  10  in 
2014 to eight in 2015, but the time taken to comply 
with tax obligations increased by four hours during 
the same period (9) to 192 hours, i.e. above the EU 
average  of  164  hours  (World  Bank  and  PwC, 
2017). From 2017, the late reimbursement of VAT 
refunds will be subject to an interest payment, and 
communication 
financial 
between 
administration  and  VAT  taxpayers  is  to  become 
fully electronic. 

the 

Graph 3.1.1:  Effective tax rates in Slovakia 

Source: Slovak Ministry of Finance 

The financial administration retains its focus on 
improving VAT compliance, especially through 
auditing.  Some  80 %  of  all  audits  are  in  the  area 
of VAT and originate primarily from VAT control 
statements.  From  2017,  a  ‘super-custody  order’ 
will  enable  the  tax  authorities  to  seize  taxpayers’ 
assets  as  a  precautionary  measure,  where  there  is 
suspicion  of  tax  fraud.  From  2017,  the  period 
during  which  audited  taxpayers  can  question  the 
impartiality of tax auditors was reduced to 15 days. 
In  2017  the  financial  administration  also  plans  to 

(9)  The  increase  was  due  to  the  extra  time  needed  to  comply 

with corporate income tax rules. 

14 

0%5%10%15%20%25%30%35%40%45%0%2%4%6%8%10%12%14%16%20082009201020112012201320142015CIT (ETR)CIT (ETR w/ legislation)VAT (ETR)VAT Gap (rhs) 
 
                                                           
 
                                                           
3.1. Public finances and taxation 

tackle  a  high  number  of  fraudulent  cash  registers 
and expand the use of virtual cash registers. 

1.4 % of total revenues in 2014, among the lowest 
in 
the  EU  (EU  average:  4.2 %).  Gifts  and 
inheritance are not taxed. 

index,  a 

tax  reliability 

Non-audit  activities  to  ensure  tax  compliance 
are  being  gradually  explored.  Currently,  control 
activities  and  cross-checking  are  cornerstones  of 
the compliance strategy, but a holistic approach to 
auditing  taxpayers  seems  to  be  lacking.  However, 
in  2017  the  financial  administration  plans  to 
develop  a 
tool  for 
identifying  and  distinguishing  compliant and non-
compliant  taxpayers  and  which  allows  for  both 
preventive  and  corrective  measures  to  be  taken. 
Broadly speaking, progress on e-administration via 
the e-communication plan and the development of 
a  call  centre  for  taxpayers  are  likely  to  help 
improve  the  service  for  taxpayers,  as  will  the 
administration’s  plan 
its  Large 
Taxpayers  Unit.  A  United  Analytical  Centre 
bringing  together  analytical  and  law  enforcement 
competences  is  set  to  provide  for  a  better  and 
faster exchange of information and improve efforts 
to tackle tax fraud. 

to  reorganise 

The taxation framework is subject to relatively 
frequent  changes.  For  2017,  the  government  has 
extended  and  increased  the  levy  on  companies  in 
regulated  industries,  which  had  been  expected  to 
expire  in  2016.  This  measure  could  arguably  also 
be  seen  as  part  of  an  effort  to  reduce  undue  rents 
stemming  from  ineffectively  regulated  network 
industries. The bank levy that had also been set to 
expire was extended until 2020. The CIT rate was 
reduced from 22 % to 21 %, reversing an increase 
that  had  come  into  force  only  two  years  before. 
Lump-sum  deductions  for 
the  self-employed, 
which  were  reduced  in  2012  to  ensure  a  more 
equal  taxation  of  self-employed  and  employees, 
have  been  increased  again  in  favour  of  the  self-
employed.  Ceiling  rates  on  healthcare  and  social 
contributions  for  high-income  earners  have  been 
increased  significantly.  Other  measures  include  a 
new 8 % tax on non-life insurances and an increase 
in excise duties on tobacco and fees on gambling. 
As of 2018, healthcare contributions on dividends 
will be replaced with a tax of 7 %. 

Property  taxation  continues  to  receive  limited 
attention.  The  current  system  of  residential 
real-estate  taxation  remains  regressive  as  it  does 
not  reflect  the  value  but  the  surface  area  of  a 
dwelling.  Recurrent 
taxes  —  a 
growth-friendly form of taxation — accounted for 

real-estate 

Environmental taxation still features conflicting 
policy  motivations.  The  electricity  price  includes 
a  levy  to  support  production  from  renewable 
resources,  but  also  a  feed-in  tariff  to  support  the 
environmentally  harmful  electricity  production 
from 
government 
introduced  environment-friendly  elements  in  the 
car registration fee, taking into account the age of 
the car and the engine power. The fee is lower for 
cars powered by alternative fuels. 

coal. (10)  The 

domestic 

Fiscal framework and spending review 

is 

envisaged 

The  medium-term  budgeting  framework  still 
shows weaknesses. While the level of detail in the 
multi-annual  budgetary  plan 
fairly  high, 
information  and  targets  beyond  the  first  budget 
year  are  only  indicative.  Binding  expenditure 
ceilings,  which  were 
the 
constitutional  law  of  2011,  have  not  yet  been 
adopted. This prevents a swifter achievement of a 
balanced  budget  —  a  requirement 
that  was 
introduced  in  national  legislation  in  2013.  The 
government  constituted 
in  March  2016  has 
postponed  the  original  deadline  for  meeting  the 
medium-term  objective  from  2017  to  2019,  partly 
reflecting  new  spending  priorities  and  investment 
needs. 

by 

The  authorities  are  considering  relaxing  the 
national  debt  brake.  The  debt  brake  introduced 
by a constitutional law in 2012 requires corrective 
actions  once  the  debt  level  reported  by  Eurostat 
exceeds specified thresholds, which are lower than 
the Maastricht debt ratio. A redefinition of the debt 
brake  thresholds  risks  diminishing  its  restraining 
power. 

The Ministry of Finance published a first series 
of  spending  reviews.  The  ‘Value  for  Money’ 
project  aims  to  improve  government  spending 
efficiency. In 2016, three reports were published in 
the  areas  of  healthcare  (see  below),  IT  and 
transport (see Section 3.4) and were annexed to the 

(10)  One  example  is  the  third  block  of  the  Novaky  thermal 
on 
power 
1 January 2016  as  it  no  longer  complied  with  emissions 
limits, but resumed operations in autumn 2016. 

plant,  which  was 

decommissioned 

15 

 
                                                           
3.1. Public finances and taxation 

multi-annual  budgetary  plan. (11)  The  level  of 
ambition appears to vary across reports, reflecting 
different  degrees  of  ownership  by  the  associated 
ministries. (12)  Nevertheless,  the  project  makes  a 
valuable  contribution  by  providing  data-based 
analytical  underpinnings  for  identifying  spending 
inefficiencies  in  the  areas  reviewed.  For  2017, 
there are plans for new spending reviews covering 
environmental  policies,  labour  market  and  social 
policies,  and  education. 
reports  are 
scheduled  for  30 April  2017,  to  be  followed  by 
final  reports  by  30 June  in  order  to  inform 
discussions  on  the  budget  proposal  in  summer 
2017. 

Initial 

Long-term sustainability of public finances 

to 

the 

Slovakia's  public  finances  still  face  risks  in  the 
long  term.  The 
long-term  sustainability  gap 
indicator  (S2) (13)  shows  that  Slovakia  is  at 
long-term 
regard 
medium  risk  with 
sustainability of public finances. The main drivers 
of  the  projected  rise  in  ageing-related  costs  are 
spending  on  healthcare  and  pensions.  Each  is 
projected  to  increase  by  2 pps  of  GDP  by  2060 
level  of  healthcare 
compared 
spending,  which 
the  EU 
average,  is  projected  to  experience  one  of  the 
highest increases in the EU by 2060. (14) 

is  currently  below 

to  2013.  The 

Pension system 

faces  very  adverse  demographic 
Slovakia 
trends.  Low  fertility  rates  are  expected  to  cause 
the working-age population to shrink, leading to a 

(11)  There  were  three  pilot  projects  prior  to  the  fully  fledged 
reviews.  They  included  spending  reviews  for  primary  and 
secondary  schools,  efficiency  of  tax  collection  by  the 
financial administration, and effectiveness of labour offices 
and active labour market policies. 

(12)  The  review  of  healthcare  expenditure  is  detailed  and 
provides concrete areas for possible savings and estimates 
of their fiscal impact. Somewhat less detailed is the review 
of 
transport 
expenditure  is  set  out  in  relatively  broad  terms  without 
enough specific information on areas that could potentially 
yield savings (and no quantification is provided). 

IT  spending.  The  planned 

review  of 

(13)  S2 determines the upfront structural adjustment required in 
order  for  the  ratio  of  gross  public  debt  over  GDP  to 
stabilise  in  the  very  long  term.  Based  on  the  Commission  
winter  2016  forecast,  the  S2  indicator  for  Slovakia  is 
estimated  at  2.5  pps  of  GDP,  with  contributions  for  the 
healthcare and pensions components accounting for 1.3 pps 
and 1.0 pp respectively. 

(14)  Average expenditure on healthcare in the EU was 7.9 % of 
GDP in 2014, while the figure for Slovakia was 5.6 %. 

in 

to 

in 

the 

linked 

fastest 

increase 

compared 

to  changes 

decline  in  the  number  of  people  in  employment, 
despite a predicted rise in the participation rate and 
the  automatic  increase  of  the  statutory  retirement 
life  expectancy. 
age 
According  to  the  2015  Ageing  Report,  Slovakia 
shows 
the  old-age 
dependency  ratio  in  the  EU.  By  2060,  there  are 
projected  to  be  fewer  than  two  workers  for  each 
pensioner, 
present. 
Consequently, the ratio of people aged 65 or above 
relative to the working-age population is expected 
to  practically  triple  between  2013  and  2060.  So, 
despite  the  effectiveness  of  the  recent  reform  in 
limiting  the  increase  in  pension  expenditure  to 
around 2 % of GDP by 2060 (bringing it to 10.2 % 
of GDP compared with an EU average of 12.4 %), 
ageing  still  poses  a  threat  to  the  long-term 
sustainability  of 
full 
implementation  of  the  reform  will  have  to  be 
closely monitored. 

system  and 

five 

the 

the 

at 

increasing.  The 

low  statutory  pension  age,  which 

Although  the  effective  retirement  age  is  one  of 
the  lowest  in  the  EU  the  retirement  period 
remains  relatively  short.  In  2014,  Slovak  men 
left the labour market at an average age of 61.6 — 
one  of  the  lowest  values  in  the  EU.  The  effective 
exit age for women was 59.7 years, driven mainly 
by  a 
is, 
time 
nevertheless,  gradually 
Slovaks  spend  in  retirement  is  relatively  short,  at 
least  for  men,  compared  to  other  EU  countries 
(16.8  and  22.7  years  for  men  and  women 
respectively,  against  the  EU  average  of  18.1  and 
22.6  years).  The  ratio  between  the  time  spent  in 
retirement  and  the  average  length  of  working 
careers  is  lower  than  the  average  for  men  (42 % 
against 43.5 % in the EU as a whole) but higher for 
women (67 % against 58 % in the EU as a whole) 
because  of  the  very  low  retirement  age.  Since 
retirement  age  is  linked  to  life  expectancy,  this 
ratio  is  projected  to  be  below  the  EU  average  for 
both  men  and  women  by  2060  (45.2 %  against 
50.4 %  for  men  and  58.7 %  against  61.8 %  for 
women). 

Recent adjustments to the pension system were 
of  an  ad  hoc  nature.  Since  2013,  pensions  have 
been  indexed  by  a  fixed  amount  determined  by 
applying  the  weighted  average  growth  of  wages 
and consumer prices (with greater weight accorded 
to the latter) to the average pension. However, the 
government decided on an ad hoc pension increase 
of 2 % in 2017. 

16 

 
                                                           
3.1. Public finances and taxation 

under-the-table 

Informal, 
remain 
common, potentially inhibiting equitable access to 
care. (18) 

payments 

The  high 
level  of  hospital  debt  has  not 
decreased.  Obligatory  external  financial  audits 
were carried out in the 14 state-owned hospitals in 
2015. Overdue liabilities of hospitals amounted to 
EUR 592 million in June 2016. Debt accumulation 
is facilitated by non-binding budgetary constraints 
and  adverse  incentives,  but  could  also  be  due  to 
poor  budget  planning  and  inefficient  procurement 
practices.  Payment  systems  are  linked  to  the 
quantity  rather  than  quality  and  performance  of 
services,  potentially  creating 
for 
overprovision 
(Kovalčík  and  Tunega,  2015). 
Public  hospitals  show  large  average  delays  in 
paying  private  suppliers.  A  new  agency  was 
established  within  the  Ministry  of  Health  in  mid-
2016  to  manage  hospitals,  among  others,  and  has 
introduced  benchmarks  for  a  wide  range  of 
services.  The  authorities  aim  to  balance  hospital 
budgets by 2018. 

incentives 

Some  steps  have  been  taken  to  rationalise 
hospital  care.  The  number  of  acute  care  beds  is 
high  (424  per  100 000  inhabitants  vs  an  EU 
average  of  356  in  2013)  while  the  bed  occupancy 
rate  is  low  (67 %  vs  an  EU  average  of  74 %).  A 
restructuring  exercise  based  on  patient  care  needs 
and  minimum  use  is  ongoing.  In  January  2017,  a 
new network of hospitals eligible for EU structural 
funds and capital investments was established. To 
reduce unnecessary recourse to emergency care, an 
out-of-pocket fee has been introduced (EUR 2 for 
out-patient  care;  EUR  10  for  in-patient  care), 
except  if  the  patient  is  taken  to  hospital.  A  new 
university  hospital  in  Bratislava  is  planned  to  be 
run  as  a  public  hospital  (Slovak  government, 
2016). A private investment group also plans to set 
up  another  new  hospital  in  the  capital  from  2018 
onwards. 

successive  delays.  Since 

introduction  of  e-health  systems  has 
The 
2008, 
suffered 
in 
EUR 80 million 
e-health, (19)  but  with  no  tangible  results  as  yet, 
according  to  findings  of  the  National  Supreme 

invested 

have 

been 

(18)  Special Eurobarometer 397 on Corruption, February 2014. 
(19)  Over  EUR 45  million  came  from  the  ESIF  and  the  state 
budget  and  a  further  EUR 35  million  from  contributions 
paid into the National Health Information Centre by health 
insurance companies. 

The  planned  changes  to  the  indexation  rules 
may  offset  the  effects  of  the  recent  pension 
reform. As of 2018, pensions are set to be indexed 
to the increase of prices in a ‘pension’ basket. This 
indexation  method  would  ensure  that  the  living 
standards  of  pensioners  are  preserved  but  their 
situation  would  deteriorate 
the 
economically  active  section  of  the  population. (15) 
The  authorities  have  expressed  their  intention  to 
introduce  possible  changes 
indexation 
formula  to  ensure  that  pension  growth  is  higher 
than  the  expected  rate  of  inflation.  If  confirmed, 
such  measures  would  put  greater  pressure  on 
public  finances  and  might  further  jeopardise  the 
long-term sustainability of the pension system. 

relative 

the 

to 

to 

Cost effectiveness of the healthcare sector 

The cost-effectiveness of healthcare in Slovakia 
remains  low.  The  spending  review  published  in 
autumn  2016  in  connection  with  the  ‘Value  for 
Money’  project  suggests  that  there  is  significant 
scope to increase the cost-effectiveness of various 
areas  of  healthcare,  providing  targeted  savings  of 
up  to  EUR 174  million  in  2017  (Černěnko  et  al., 
2016).  The  review’s  recommendations  (mainly 
price  reductions)  are  already  being  implemented, 
notably  through  price  referencing  of  healthcare 
materials, devices and equipment and reduction in 
payments  for  diagnostics  and  other  specialised 
treatments;  tangible  results  are  expected  from 
2017. 

The health status of the population is improving 
slowly  and  private  healthcare  expenditure  is 
relatively  high.  Between  2008  and  2014,  there 
was  a  two-year  increase  in  healthy  life  years  but 
the figures remain well below the EU average for 
both  genders  (54.6  vs  61.8  for  men  and  55.5  vs 
61.4  for  women).  Preventable  mortality  in  2014 
was  also  higher  than  in  the  EU  (339.5  deaths  per 
inhabitants  vs  an  EU  average  of 
100 000 
204.1). (16)  Out-of-pocket  payments  are  high  as  a 
proportion  of  total  health  expenditure  (23.3 % 
the  EU  average  of  16 %). (17) 
compared 

to 

(15)  This  is  indicated  by  the  declining  benefit  ratio,  which 
denotes  the  relationship  between  the  average  pension 
benefit and the average gross wage. 

(16)  Preventable  mortality  relates  to  deaths  which  could  have 
been avoided by preventive public health interventions. 
(17)  Out-of-pocket  payments  are  official  expenses  for  medical 
care that are borne by the patient and are not reimbursed by 
insurance. 

17 

 
                                                           
                                                           
3.1. Public finances and taxation 

results,  with  only  95  new  GPs  expected  to  start 
practising  in  2017.  According  to  professional 
associations, many more additional GPs and nurses 
are needed in the system. To reduce the case load 
for  specialist  care,  the  role  of  GPs  has  been 
expanded  by 
cover  pre-operative 
to 
examinations  and  chronic  care.  New  clinical 
guidelines,  to  be  drawn  up  with  support  from  the 
European Social Fund (ESF) in 2017-2020, are not 
expected to be ready before the end of 2017. 

law 

Graph 3.1.2:  Proportion of patients who visited an 

emergency department because the primary 
care physician was not available 

Note: Data were collected within the QUALICOPC study 
(Quality and Costs of Primary Care in Europe) between 2011 
and 2013. The reference population is the proportion of 
people who visited an ED in the previous year. 

No data available for Croatia and France. 

Source: OECD (2016), Health at a Glance: Europe 

(e.g. 

health 

Audit  Office.  The  implementation  of  extended 
e-health 
records, 
electronic 
e-prescriptions  and  e-referrals)  was  postponed 
until 2017 because of signs of reticence on the part 
of users. An IT system allowing performance data 
to be collected from healthcare providers is at the 
validation  phase  and  is  currently  in  use  in  eight 
hospitals. 

introduction  of 

The 
the  diagnosis-related 
groups (DRG) system for remunerating hospital 
activities,  to  allow  more  transparency  of  care 
is  being  gradually 
supply  and  pricing, 
implemented following preparatory activities in 
previous years. Since 1 January 2017, DRG is in 
place  as  a  regular  payment  mechanism,  first  on  a 
later  on  a  mandatory  basis. 
voluntary  and 
Payments in 2017 will be "budgetary neutral", with 
several safety nets in place (global budgets, safety 
payment  corridors  and  benchmarking  with 
previous payment mechanism). However, there are 
implementation 
(Commission 
challenges 
services/Economic  Policy  Committee,  2016), 
delays and systemic shortcomings as providers are 
ill-prepared,  reporting  systems  are  not  ready  and 
initial input data are of poor quality. 

integrated  care 
The  implementation  of  an 
2014-2020 
the 
stalled.  For 
model  has 
programming  period,  European  funds  totalling 
EUR 130  million  have  been  earmarked  to  set  up 
134  integrated  healthcare  centres.  The  planned 
pilot phase announced for 2015-2016 has not taken 
place.  While  stakeholder  consultations  were  held 
in  2015,  the  related  ‘master  plan’  for  service 
distribution  has  still  to  be  updated  and  the 
announced  cost-benefit  analysis  and  definition  of 
integrated healthcare centres are not yet ready. 

The  number  of  general  practitioners  (GPs)  is 
low  and  increasing  only  gradually.  The  number 
of GPs per 100 000 inhabitants (42 in 2007, latest 
available data) is well below the EU average (78.3 
in  2013)  and  results  in  inefficient  provision  of 
primary  care  (Graph  3.1.2).  The  lack  of  GPs  is 
contributing  to  high  rates  of  potentially  avoidable 
medical visits (twice the EU annual average, 11 vs 
6.2  in  2013)  through  specialist  referrals  and 
the 
department 
emergency 
ratio  of 
to 
intends 
government 
specialist-to-GP visits from the current 80-20 % to 
60-40 %, a residency programme designed to boost 
the number of GPs has not yet produced significant 

visits.  While 
reduce 

the 

18 

0%10%20%30%40%50%60%70%80%DKBEELROIEMTFIPLATLTLVHULUITESCYEUNLDEPTEESEBGUKSICZSK 
 
 
 
3.2.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

(Graph  3.2.1).  While 

Slovakia  witnessed  a  marked  improvement  in 
its  labour  market  in  2015  and  2016,  not  least 
due  to  strong  job  creation.  Section  1  reviews 
Slovakia's  labour  market  improvement,  which  has 
been driven  more by  changes  in  job  creation  than 
job  destruction 
job 
destruction  (i.e.  the  separation  rate)  has  remained 
broadly stable over the past 10 years (except for a 
spike  in  2009),  the  job-finding  rate  has  increased 
rapidly  and  reached  the  pre-crisis  level  at  the  end 
of  2015.  This  also  led  to  a  sharp  increase  in 
outflows  from  unemployment,  while  inflows  to 
unemployment  did  not  change  dramatically.  As  a 
result,  Slovakia’s  unemployment  rate  has  been  in 
rapid  decline,  while  the  employment  rate  jumped 
to 70.1 % in Q3-2016 (still below the EU average 
of  71.5 %  and  the  national  Europe  2020  target  of 
72 %).  Moreover,  as  set  out  in  Section  1,  the 
labour  market  tightening  is  accompanied  by  early 
signs of potential labour supply shortages. 

Graph 3.2.1:  Job finding and separation rate 

Note: Separation rate: proportion of jobs in the economy for 
which a separation of the employee from his or her post is 
observed during a given period of time. Job-finding rate: 
proportion of unemployed people who find a job during a 
given period of time. Average over four quarters: reference 
quarter and previous three quarters. 
Source: European Commission 

Despite  these  positive  developments,  several 
labour market challenges remain apparent. For 
specific vulnerable groups, such as the low-skilled, 
young  workers,  Roma  and  mothers  with  young 
are 
children, 
unfavourable,  with  low  participation  and  high 
unemployment.  This  pattern  is  aggravated  by 
strong  regional  disparities  as  discussed  in  last 

labour  market 

outcomes 

year’s  country  report  (European  Commission, 
2016a). 

Long-term unemployment 

in 

decreased 

parallel  with 

Long-term  unemployment  (LTU)  declined  in 
2015 and 2016, but despite these improvements 
it  remains  one  of  the  highest  in  the  EU.  The 
increase  in  job-finding  rates  affected  both  the 
short-  and  long-term  unemployed.  Consequently, 
LTU 
overall 
unemployment. Despite this positive development, 
the LTU rate in Slovakia is still among the highest 
in  the  EU  (5.6 %  in  Q3-2016,  EU:  3.8 %).  In 
particular, 
long-term 
the  proportion  of  very 
unemployment (>24 months) is very high at 47 % 
of overall unemployment in 2015 (Graph 3.2.2). In 
recent  years,  Slovakia  introduced  several  new 
active  and  passive  measures 
the 
unemployment  of  specific  vulnerable  groups, 
which  is  likely  to  have  helped  bring  about  a 
reduction in LTU (see below). 

tackle 

to 

Graph 3.2.2:  Unemployment by duration, 2015 

Note: Unemployment by duration is expressed as a 
percentage of total unemployment (15-74) in 2015. 
Source: European Commission 

LTU  is  a  major  risk  for  the  low-skilled  and 
young.  In  2015,  30 %  of  the  low-skilled  were 
unemployed for more than a year, in comparison to 
8 %  and  3 %  respectively  for  the  medium-  and 
high-skilled.  A  lower  level  of  education  increases 
the  probability  of  LTU  across  all  age  groups,  in 
particularly  for  the  young  (15-29 years)  (Graph 
3.2.3).  In  general,  the  young  are  overrepresented 
among  the  long-term  unemployed.  However,  this 

19 

0.00.20.40.60.81.01.20.01.02.03.04.05.06.02000Q22001Q22002Q22003Q22004Q22005Q22006Q22007Q22008Q22009Q22010Q22011Q22012Q22013Q22014Q22015Q22016Q2% employed% unemployedFinding rate (lhs)Separation rate (rhs)0%10%20%30%40%50%60%70%80%90%100%ELSKHRIEPTBGITESBESIDELVCZCYLTHUMTNLFREEROPLUKATFIDKLUSE>24 months12-24 months6-12 months<6 months 
 
 
 
3.2. Labour market, education and social policies 

does  not  apply  to  highly  skilled  young  people. 
Furthermore,  Slovakia  has  a  consistently  high 
proportion  of  young  people  not  in  education, 
employment  or  training  (13.7 %  in  2015  vs  12 % 
in  the  EU  as  a  whole,  age  group  15-24).  These 
findings are particularly alarming in the light of an 
increasing  early  school  leaving  rate  and  low  — 
albeit increasing — tertiary education attainment. 

Graph 3.2.3:  Personal characteristics of the long-term 

unemployed, 2014 

the 

where  Roma  are  concentrated.  The  key  factors 
behind labour market divisions are low educational 
attainment  and  qualifications,  and  persistent 
barriers and discrimination in access to education, 
housing,  healthcare  and 
labour  market 
(Kahanec,  2014;  IFP,  2014).  A  survey  (FRA, 
2016) showed that 30 % of the Roma surveyed felt 
they  had  been  discriminated  against  because  of 
their  background  at  least  once  in  the  past  12 
months  in  at  least  one  area  of  daily  life  (22 % 
when  looking  for  a  job).  Only  18 %  of  the 
respondents  who 
felt  discriminated  against 
reported the last incident to the authorities or made 
a complaint. Almost 74 000 Roma live in isolated 
settlements, often in poor living conditions. 

Labour market policy 

lowered 

the  government  has 

low-wage  workers  and 

Slovakia  has  implemented  several  measures  to 
encourage  low-wage  earners  to  work.  In  recent 
social 
years, 
contributions  for 
the 
long-term  unemployed  and  introduced  in-work 
benefits  for  the  long-term  unemployed  (European 
Commission, 2016a). These measures have helped 
counter  the  inactivity  trap  for  those  earning 
between  the  minimum  wage  and  80 %  of  the 
average  wage  (Graph  3.2.4). (21)  On  average, 
low-wage workers in this income bracket will now 
retain  72 %  of  their  gross  income  when  working, 
compared  to  only  58 %  in  2014.  For  higher 
incomes  (80 %  to  120 %  of  average  income)  the 
inactivity  trap  has  worsened.  However,  that  is 
likely  to  have  a  less  severe  impact  on  this 
higher-paid group. 

Various 
labour  market  policies  have  seen 
advances.  Slovakia  has  widened  the  scope  of 
active  labour  market  policies,  introducing  support 
measures targeting the long-term unemployed and 
other  vulnerable  groups  and  reforming  public 
employment  services.  A  recent  study  on  the 
effectiveness  of  Slovak  public  employment 
services  and  active  labour  market  policies  under 
the  ‘Value  for  Money’  project  (IFP,  2016)  was  a 
step forward in terms of improving the evaluation 
of  policy  measures.  The  findings  confirmed  that 
current  active  labour  market  policies  are  often 
either poorly designed (e.g. they are too focused on 

(21)  The  inactivity  trap  measures  the  part  of  additional  gross 
wage  that  is  taxed  away  in  the  case  where  an  inactive 
person takes up a job. 

Educational levels included are low (ISECD 0-2), Medium 
(ISECD 3-4) and High (ISCED 5-6). Age levels included are 
Young (15-29), Middle age (30-54) and Old (55-64).  
Source: Based on LFS Microdata, 2014 

The  Roma  community  is  still  one  of  the  most 
disadvantaged groups in the labour market. The 
situation  of  Roma  in  Slovakia  is  particularly 
precarious. They are estimated to make up 9 % of 
the total population (Council of Europe, 2010) and 
the age distribution is skewed towards the younger 
cohorts. According to Fundamental Rights Agency 
(FRA)  survey  results  for  2016,  only  around  25 % 
of Roma aged 20-64 were engaged in ‘paid work’ 
at  the  time  of  the  survey  or  in  the  previous  four 
weeks,  while  48 %  were  unemployed. (20)  The 
ethnic  segmentation  of  labour  markets  results  in 
poverty,  social  exclusion  and  a  lower  labour 
market  status  for  Roma  and  undermines  the 
economic  potential  of  Slovakia’s  poorest  regions, 

(20)  The  2016  FRA  survey  improved  on  the  sampling  and 
weighting  methods  developed  for  the  2011  survey,  so  the 
results  provide  a  more  accurate  representation  of  the 
situation of Roma in the countries covered. Indicators used 
are  closely  resemble  those  applied  in  standard  European 
surveys (EU-SILC, EU LFS) but full comparability was not 
intended. For more details see FRA 2016. 

20 

0%25%50%75%100%LTULabour forceLow education & youngLow education & middle ageLow education & oldMedium education & youngMedium education & middle ageMedium education & oldHigh education & youngHigh education & middle ageHigh  education & old 
 
                                                           
                                                           
3.2. Labour market, education and social policies 

for 

the 

low-skilled, 

needs.  Second-chance  education  or  apprenticeship 
schemes 
long-term 
unemployed and Roma are not available and adult 
participation  in  life-long  learning  remains  low 
(3.1 %  in  2015).  The  recently  announced  plans  to 
promote  practices  to  validate  non-formal  and 
informal learning are a step in the right direction. 

New  legislative  measures  aim  to  increase  the 
impact  of  activation  measures  and  to  tackle 
some of the barriers to primary labour market 
entry  faced  by  the  long-term  unemployed  and 
marginalised groups. Key measures were taken to 
address  indebtedness,  which  is  a  serious  social 
problem for many low-income households and acts 
as an impediment to entering official employment 
because  of  the  threat  of  permanent  seizure  of 
official  income.  The  Slovak  Justice  Ministry 
estimates  that  at  least  100 000  individuals  are 
caught in a debt trap. The recent amendment of the 
Act  on  bankruptcy  and  restructuring  will  make 
personal  debt  relief  simpler  and  cheaper  and 
therefore more accessible through bankruptcy or a 
repayment  schedule.  A  legal  aid  centre  will 
provide  assistance  to  indebted  people  without 
income  or  assets  to  help  lift  them  out  of  the  debt 
trap. (22)  Stricter  sanctions  for  non-cooperation 
before  and  during  placement  in  active  labour 
market  programmes  will  be  introduced  under  a 
new amendment to the Employment Services Act. 
While  the  component  on  tackling  indebtedness 
may  have  very  positive  effects,  the  sanctions 
component  may  put  vulnerable  groups  off  public 
employment services if they are not combined with 
individualised support before, during and after the 
placement. 

is 

The  implementation  of  measures  for  Roma 
stagnating.  The  desegregation 
inclusion 
legislation  adopted 
in  2016  has  not  yet 
demonstrated  measurable  results  (see  education 
section).  Increased  ESF  support  was  allocated  to 
marginalised  Roma  communities,  but  there  have 
been 
implementation 
(European  Commission,  2016a).  The  launch  of 
outreach support such as social field work (which 
was successful in the past) and community centres 
has  been  postponed  to  2017.  ESF  projects  on 
rented social housing and access to drinking water 

significant  delays 

in 

(22)  Only  391  people  applied  for  personal  bankruptcy  in 
Slovakia  in  2015  compared  to  more  than  32 000  in  the 
Czech Republic. 

activation measures) or targeted (geographically or 
in  terms  of  the  group(s)  covered).  There  is  a  lack 
of effective active labour market measures for the 
low-skilled. Insufficient financing for active labour 
market  policies 
in  2015) 
combined  with  a  high  caseload  (currently  2 280 
specialised  counsellor)  and  an 
clients  per 
the 
underdeveloped 
performance  of  public  employment  services  limit 
potential efficiency improvements (by 10-35 %). 

(0.16 %  of  GDP 

for  managing 

system 

Graph 3.2.4:  Inactivity trap by percentage of the average 

wage, 2014 and 2015 

Note: The inactivity trap - or the implicit tax on returning to 
work for inactive persons - measures the part of additional 
gross wage that is taxed away in the case where an 
inactive person (not entitled to receive unemployment 
benefits but eligible for income-tested social assistance) 
takes up a job.  
Source: OECD Tax and Benefits database 

on 

The  new  action  plan  on  LTU  will  be 
implemented  in  2017-2020  with  the  aim  of 
providing  more  individualised  services.  It  will 
include  a  combination  of  projects  financed  by  the 
ESF  on  provision  of  specialised  counselling, 
psycho-social 
indebtedness, 
including 
problems,  substance  abuse  and  other  barriers  to 
labour market entry. A newly introduced profiling 
improve  case  allocation.  The 
system  should 
planned  hiring  of  new 
staff, 
outsourcing  of  job  search  support  and  enhanced 
cooperation with private agencies and NGOs could 
help decrease the caseload (see above). The labour 
market prospects of the long-term unemployed and 
the  low-skilled  are  set  to  be  further  enhanced  by 
the 
training 
programmes  based  on  regional  labour  market 

introduction  of 

individualised 

specialised 

21 

01020304050607080901112131415161718191101111121131141151161171181191Inactivity trap (%)Percentage of average income20142015 
 
                                                           
3.2. Labour market, education and social policies 

2014).  About  a  third  of  the  gap  can  be  explained 
by differences in individual and job characteristics 
leading to gender segregation in the labour market, 
in 
i.e.  women  are  more  often  employed 
occupations  and  industries  that  pay  comparatively 
lower  salaries.  Two  thirds  of  the  gap  remain 
unexplained  but  can  be  attributed  to  various 
factors,  such  as  the  low  transparency  of  wage 
negotiations 
female 
the  private 
employees’  lack  of  awareness  of  male  salary 
levels,  and  discrimination.  Challenges  concerning 
the  participation  of  women  in  the  labour  market 
also have a detrimental knock-on effect on efforts 
to  foster  an  integrated  approach  to  investing  in 
children. 

sector, 

in 

Graph 3.2.5:  Employment rate by gender and age, 2015 

Source: European Commission 

Efforts  have  been  made  to  strengthen  the 
quality  and  affordability  of  childcare.  The 
quality  of  care  for  children  under  three  is  not 
regulated  by  minimum  standards  in  terms  of  the 
care facilities or the qualification requirements for 
care  staff.  An  amendment  to  the  Social  Services 
Act will enter into effect in March 2017 in order to 
address  this  shortcoming.  Childcare  benefit  for 
working  parents  has  also  been  increased  (there 
were  very  few  recipients  in  2015).  The  extension 
of childcare facilities is still insufficient. Only 7 % 
of  children  under  three  were  enrolled  in  formal 
childcare in 2014. For children between the age of 
three  and  the  compulsory  school  age  of  six,  the 
coverage rate is better (74 %), but it is still below 
the  EU  average  (83 %)  and  the  Barcelona  targets 
(90 %).  The  number  of  unsuccessful  applications 

face a similar delay. Action plans for the National 
Roma Integration Strategy expired in 2015 and the 
new  ones  for  the  period  2016-2018  have  still  not 
been  adopted.  Long-awaited  legislation  on  social 
enterprises  is  now  scheduled  to  be  drawn  up  and 
adopted in 2017 and will not enter into force until 
2018. Furthermore, no headway has been made on 
addressing  the  lack  of  data  on  the  economic 
integration of Roma. 

youth 

sustainable 

The  measures  for  young  people  under  the 
implementation of the Youth Guarantee helped 
employment. 
support 
Short-term  programmes  on  voluntary  work  and 
traineeships  proved  particularly  successful  for 
young  people  under  the  age  of  29  (IFP,  2016). 
However  there  are  still  no  individualised  services 
targeting  the  specific  problems  of  the  young 
low-skilled  or  the  young  long-term  unemployed. 
This  bottleneck  will  be  addressed  by  new  youth 
measures planned for 2017 in the form of a support 
package including a training or work placement. 

for  a 

requirements 

The government implemented several measures 
to  address  regional  disparities  in  the  labour 
market.  The 
removal 
allowance  were  loosened,  leading  to  increased 
uptake  of  this  measure,  albeit  from  a  low  starting 
point  (364  beneficiaries  in  Q2-2016  compared  to 
53 in 2015). Under the new legislation on regions 
lagging  behind,  regional  action  plans  were  drawn 
up  to  tackle  unemployment.  The  objective  is  to 
create 17 615 new jobs by 2020 by promoting, for 
example, 
social 
enterprises. Successful implementation rests on the 
creation of regional and local partnerships. 

infrastructure 

better 

and 

Employment of women 

Women’s skills are underused and undervalued 
on  the  labour  market.  The  female  employment 
rate  (60.3 %;  EU:  64.2 %)  remained  well  below 
that  of  men  (75 %;  EU:  75.8 %)  in  2015.  The 
employment  gap  is  particularly  wide  for  women 
under  the  age  of  40,  and  diminishes  sharply  for 
women  above  that  age  (Graph  3.2.5).  Slovakia  is 
one of the countries in which  motherhood has the 
highest  impact  on  employment  and  professional 
life. This is the result of long parental leave, which 
is very rarely taken up by men (2-3 %), a shortage 
of childcare facilities and a low update of flexible 
work  arrangements.  The  unadjusted  gender  pay 
gap  is  among  the  highest  in  the  EU  (19.7 %  in 

22 

02040608010015-1920-2425-2930-3435-3940-4445-4950-5455-5960-6465-6970-74% of populationMaleFemale 
 
3.2. Labour market, education and social policies 

maximum  of  six  months.  Despite  attempts  to 
develop  basic  outreach  programmes  (work  in  the 
social  field,  preventive  healthcare  and  community 
work),  the  link  to  quality  social  services  such  as 
individualised  support  for  inactive  people  and 
registered  jobseekers,  access  to  social  housing, 
debt  management  counselling,  participation  in 
early  childhood  education  and  support  for  weaker 
pupils is underdeveloped. 

Graph 3.2.6:  Poverty gap for selected groups 

Note: The poverty gap estimates the depth of poverty and 
measures how far, on the average, the poor are from that 
poverty line. 
Source: European Commission 

The availability of social housing is very scarce 
(around  3 %  of  the  total  housing  stock)  and 
support  for  rental  accommodation  remains 
limited.  Serious  overcrowding  is  a  problem  for 
many of the poor (57.6 % vs EU average of 29.7 % 
in  2015)  and  large  numbers  of  social  housing 
tenants face severe housing deprivation (21.6 % vs 
EU  average  of  9.6 %  in  2015).  There  are  4 061 
dwellings  without  a 
legal  permit  and  4 131 
makeshift shanties  that do  not  meet  the  criteria to 
be 
‘house’ 
proper 
approximately  65 000  residents  (Atlas  of  Roma 
Communities,  2013).  Despite  the  urgent  need,  the 
number  of  state-supported  housing  units  has 
stagnated  at  relatively  low  levels  in  recent  years 
(between  1 300  and  2 000  in  2012-2015).  Some 
towns 
struggle  with 
co-financing  requirements  when  applying  to  the 
State  Housing  Development  Fund  for  loans  to 
build  social  housing.  Deprived  households  then 
face  difficulties  in  accessing  the  housing  because 

and  municipalities 

buildings 

classed 

as 

for  kindergarten  places  is  still  high,  especially  in 
the  region  of  Bratislava.  EUR 138  million  in  EU 
funding was made available in 2016 to increase the 
provision of preschool care in the coming years. 

Social inclusion and poverty reduction 

Poverty  rates  remain  low  but  the  intensity  of 
poverty  is  of  concern.  In  2015,  the  number  of 
people  at  risk  of  poverty  or  social  exclusion 
remained  at  18.4 %  (significantly  below  the  EU 
average  of  23.7 %)  and  the  number  of  people 
subject  to  severe  material  deprivation  dropped 
further  to  9 %,  although  this is still  above  the  EU 
average  of  8.1 %.  The  poverty  rate  among  Roma 
remains exceptionally high, at several times that of 
the  overall  population  (FRA,  2016).  After  several 
years  of  steady  increases,  the  poverty  gap,  which 
measures  the  intensity  of  poverty  (i.e.  how  poor 
the  poor  are),  stagnated  at  28.9 %  in  2015,  above 
the EU average of 24.9 % (Graph 3.2.6). The rate 
of  poverty  among  Roma  is  more  than  six  times 
higher than for the general population. It is high in 
comparison  with  other  Member  States  with  a 
(Bulgaria,  Czech 
sizeable  Roma  minority 
Republic,  Hungary  and  Romania),  where  the  rate 
of  poverty  for  Roma  is  estimated  to  be  between 
three  and  six  times  that  of  the  general  population 
(FRA, 2016). 

Shortcomings  in  the  social  safety  net  persist. 
Around  230 000  people  relied  on  minimum 
income support (benefits to cover material need) in 
2016.  The  number  of  recipients  and 
jointly 
assessed household members declined further as a 
result  of  falling  unemployment  and  a  measure  to 
make  eligibility  for  the  support  conditional  upon 
in  workfare  (‘activation  work’). 
participation 
There  is  still  no  clear  mechanism  for  establishing 
and  reviewing  the  level  of  minimum  income 
support. The scheme’s conditions in relation to the 
number of members in the household disadvantage 
larger  families  with  more  children.  The  housing 
allowance is not available to those who are most in 
need,  particularly  marginalised  Roma  who  live  in 
undocumented  dwellings,  and  homeless  people, 
because  eligibility 
is  conditional  upon  home 
ownership, a rental contract or residence in a social 
care 
facility.  The  proportion  of  short-term 
unemployed covered by unemployment benefits is 
considered low, estimated at 18 % in 2015, 11 pps 
lower  than  the  EU  average.  Eligibility  conditions 
are strict and the duration of benefits is short, at a 

23 

0%5%10%15%20%25%30%35%40%20052006200720082009201020112012201320142015Children (<18y)Working age (18-64)Elderly (65+)Total 
 
3.2. Labour market, education and social policies 

achiever.  At  the  same  time,  the  proportion of  low 
achievers in the higher social quartile is also higher 
than  in  most  other  EU  countries  (OECD,  2016a). 
Against  a  backdrop  of  declining  educational 
outcomes,  rising  inequalities  in  education  and 
heavy  societal  pressures  (including 
teachers’ 
strikes),  the  authorities  have  initiated  ambitious 
reforms  at  all  education  levels  and  have  begun 
preparing  a  10-year  education  strategy.  The 
ongoing  comprehensive  consultation  process  is  to 
be  followed  by  the  adoption  of  a  government 
strategy in early 2017. 

General  government  expenditure  on  education 
remains  very  low,  leading  to  low  educational 
outcomes.  At  4.2 %  of  GDP  in  2014,  Slovakia’s 
expenditure is much lower than the EU average of 
4.9 %.  The  latest  OECD  data  also  point  to  an 
increase  in  annual  expenditure  per  student  at  all 
levels, which nevertheless remains low at 70 % of 
the OECD average for primary education, 59 % for 
secondary  education  and  65 % 
tertiary 
education (OECD, 2016a). Education is among the 
topics to be analysed in 2017 under the ‘Value for 
Money’ project. 

for 

low  participation 

The 
in  early  childhood 
education  and  care  has  an  adverse  impact  on 
(PISA  2015). 
future  educational  outcomes 
Against  this  background,  the  low  participation  of 
Roma  children  in  early  childhood  education  and 
care (estimated at 34 %) is particularly problematic 
(FRA,  2016).  The  national  participation  rate  also 
remains 
in  2014, 
low,  standing  at  77.4 % 
compared with an EU average of 94.3 % (from the 
age  of  four  to  the  start  of  compulsory  education). 
Capacity  is  being  bolstered  with  the  focus  on 
places with the highest unmet demand, high levels 
of  unemployment  and  with  a  large  proportion  of 
marginalised Roma communities. Consideration is 
being given to making education compulsory from 
the age of five. 

The  early  school  leaving  rate  remains  low  in 
international  comparison  (6.9 %  in  2015),  but 
regional  disparities  are  high  and  the  rate  has 
been  increasing  constantly  since  2010.  It  has 
exceeded  the  6 %  Europe  2020  national  target  in 
recent  years  (for  more  information  see  European 
estimated 
Commission,  2016b).  The  high 
proportion  of  Roma  children  who  are  expected  to 
leave  school  early  is  of  particular  concern,  given 
the  significant  impacts  on  their  future  labour 

of stringent eligibility requirements for prospective 
tenants.  Accompanying  support  services  and 
monitoring of the use of the social housing are not 
always  sufficient  to  tackle  rent  arrears  and  other 
problems.  Assisted  construction  of  family  homes 
interest-free  microloans  was 
combined  with 
among  marginalised 
piloted 
successfully 
the  Roma  but  further 
communities  such  as 
systemic  support  would  allow  for  making  greater 
headway. 

system 

long-term 

long-term  care 

The 
remains 
care 
underdeveloped.  Family  carers  still  provide  a 
substantial  proportion  of 
in 
Slovakia. As a result, female inactivity due to care 
responsibilities ranks among the highest in the EU. 
The  status  of  informal  carers  has  been  boosted 
since January 2017. The allowance for caring for a 
person with a severe disability has been increased 
by  EUR 27.10  to  EUR 247.65,  benefiting  33 450 
eligible recipients, and state pension insurance for 
carers  will  no  longer  be  subject  to  a  time  limit. 
This  should  provide  caregivers  with  better 
protection against poverty in old age. Likewise, the 
safeguard  limit  on  the  income  of  people  with 
severe  disabilities  has  been 
increased,  by 
EUR 59.44  to  EUR 336.75,  benefiting  17 598 
eligible  recipients.  Overall,  however,  progress  in 
the  transition  from  institutional  to  community-
based care is too slow and does not go far enough, 
and  support 
is  still 
insufficient  (Concluding  Observations  of  the  UN 
the  Rights  of  Persons  with 
Committee  on 
Disabilities, 2016). 

independent 

living 

for 

Education and skills 

and 

in  basic  skills  has 
Students’  performance 
deteriorated 
educational 
further 
inequalities remain very pronounced. According 
to  the  2015 OECD  Programme  for  International 
Student Assessment (PISA), the proportion of low 
achievers  is  high  in  all  areas  tested  (31 %  in 
science, 32 % in reading and 28 % in mathematics) 
and  lies  significantly  above  the  EU  average. 
Average  performance  is  also  significantly  below 
the  EU  average.  The  impact  of  socioeconomic 
status  on  educational  outcomes  is  strong:  the  gap 
in performance between the upper and lower social 
quarters  of  the  PISA  socioeconomic  index  is 
among  the  largest  in  the  EU  (above  35  pps 
compared to an EU average gap of 26 pps). Every 
second pupil in the lowest social quartile  is a low 

24 

 
3.2. Labour market, education and social policies 

have 

there 

inclusive 

education 

loopholes  which  need 

securing  parental  consent.  While  the  competences 
of  the  state  school  inspectorate  to  steer  the  shift 
towards 
been 
its  capacities  have  not  been 
strengthened, 
are 
adequately 
and 
strengthened 
implementation 
to  be 
addressed.  The  reform  will  be  supported  by  two 
ESF projects aimed at providing extra pedagogical 
staff  to  support  inclusive  education,  offering 
support  programmes 
for  weaker  pupils  and 
informal education for children who do not attend 
early  childhood  education,  and  supporting  the 
transfer  of  pupils  from  special  to  mainstream 
education. However, the impact of the project may 
be  limited  as  it  covers  only  130  schools  and  50 
kindergartens (European Commission, 2016a). 

the 

Initial  steps  have  been  taken  to  improve  the 
attractiveness  of 
teaching  profession. 
Teachers’  salaries  have  been  low  for  some  time, 
both  in  international  comparison and  compared  to 
the  salaries  of  workers  with  similar  qualification 
levels  (Graph  3.3.7).  Salaries  increased  by  6 %  in 
September  2016  and  a  further  6 %  increase  in 
in  collective 
September  2017  was  agreed 
bargaining.  A  further  average  annual  increase  of 
6 %  is  envisaged  for  2018-2020  (Ministry  of 
Finance,  2016).  Faster  salary  increases  are  being 
considered  for  younger  teachers. (26)  Teachers, 
however,  consider  the  increases  insufficient  and 
some  continued  their  strike  actions  in  2016.  As 
well as increasing salaries, the government aims to 
restore the attractiveness of the teaching profession 
by 
for  entering  and 
raising 
graduating  from 
teacher-training  programmes. 
Plans are also afoot, with support from the ESF, to 
improve  initial  teacher  training,  in  particular  by 
training  and  continuing 
improving  practical 
professional  development.  Everything  considered, 
it is still too early to assess the planned reforms for 
teacher 
training  and  continuing  professional 
development. 

the  standards 

(26)  This is due to the need to attract talented young people to 
the  profession  and 
international 
comparison,  the  gap  in  salaries  is  wider  for  younger 
teachers than for older ones (IVP, 2015). 

that, 

fact 

the 

in 

market prospects (FRA, 2016). (23) Since Slovakia 
has one of the lowest employment rates in the EU 
for  people  without  upper  secondary  education 
(33.2 % compared to the EU average of 52.6 % in 
2015),  the  socioeconomic  cost  of  early  school 
leaving is particularly pronounced. 

Educational inequalities are of serious concern. 
The latest data point to a significant proportion of 
Roma  children  attending  segregated  schools  or 
classes  (FRA,  2016). (24)  This  can  be  partially 
explained  by  the  uneven  distribution  of  the  Roma 
population in the country. It is also estimated that 
the  proportion  of  Roma  pupils  attending  special 
education  establishments  is  among  the  highest  in 
the  region  (FRA,  2016).  According  to  Education 
Ministry data, the proportion of pupils with special 
needs  taught  in  special  schools/classes  rose  from 
4.7 % in 2006 to 6.2 % in 2015 and is considerably 
higher  in  poorer  regions.  The  impact  of  attending 
so-called  ‘grade  zero’  classes  on  educational 
attainment and equality was analysed by the State 
School  Inspectorate  in  2015  for  the  majority  of 
schools.  Results  showed  that  81%  of  pupils 
continued  their  education  in  mainstream  inclusive 
education.  Moreover,  the  practice  of  setting  up 
offshoots  of  vocational  schools  in  the  vicinity  of 
Roma  settlements  is  worrying  because  of  their 
substandard  equipment,  limited  choice  of  study 
programmes  and  their  role  in  hindering  inclusive 
education (Balážová, 2015). 

A  reform  to  support  socially  and  ethnically 
inclusive  education  entered  into  force  in  2016, 
but  effective 
implementation  depends  on 
political commitment. (25) The reform targets the 
misplacement  of  children  in  special  schools  or 
classes  on  the  basis  solely  of  their  disadvantaged 
socioeconomic  background.  The  State  School 
Inspection and the Public Advocate of Rights have 
highlighted  practical  difficulties  in  putting  the 
reform  into  effect,  such  as  the  use  of  appropriate 
screening  tests,  timely  re-diagnosis,  placement  of 
pupils  from  special  needs  education  with  lighter 
into  mainstream  education  or 
curricula  back 

(23)  FRA estimates that 58 % of Roma children are early school 

leavers. 

(24)  The  2016  FRA  survey  indicates  that  62 %  of  Roma 
children  in  Slovakia  attend  a  school  where  all  or  most 
children  are  Roma  (FRA  2016).  Using  a  different 
methodology,  the  2015  Roma  Inclusion  Index  estimated 
that 52 % of Roma children receive education in segregated 
schools (Roma Decade 2015). 

(25)  See European Commission, 2016b, for more information. 

25 

 
                                                           
                                                           
3.2. Labour market, education and social policies 

Graph 3.2.7:  Salary of teachers, relative to earnings for full-
time, full-year workers with tertiary education 
(ISCED 5 to 8) 

including  one 

under  discussion, 
for  higher 
education.  In  the  end,  both  could  be  merged  into 
one  strategic  and  long-term  document,  to  be 
adopted by the government in April 2017.  All of 
these announcements seem to be going in the right 
direction  but  have  yet  to  be  turned  into  concrete 
proposals.  

sector 

automotive 

The  dual  vocational  education  and  training 
(VET)  scheme,  designed  in  response  to  the 
needs  of  industry,  entered  its  second  year  of 
implementation.  An  increasing  proportion  of 
manufacturing  companies  report  difficulties  in 
hiring  people  with  the  right  skills,  for  instance  in 
the 
(European  Business 
Statistics,  2016).  While  the  interest  of  employers 
in dual VET is growing, the scheme does not seem 
to be sufficiently attractive to young people (27) or 
to  certain  schools.  Targeted  efforts 
to  raise 
awareness  of  the  benefits  of  dual  VET  among 
young  people  in  compulsory  education  and  their 
families  are  insufficient.  For  instance,  there  is  a 
need  for  more  direct  involvement  of  companies 
and social partners in guidance and communication 
activities. Innovative schemes to make professions 
more attractive, in particular where there are skills 
shortages,  are 
insufficiently  developed.  The 
practice  already  in  place  in  some  companies, 
where a ‘job guarantee’ is offered to young people 
who enter their dual VET programme, can serve as 
a positive example. 

(27)  For the 2016/2017 school year, 293 companies signed up to 
the  scheme,  offering  2 763  apprenticeship  places,  but  due 
to  insufficient  demand  only  1 121  new  contracts  were 
signed, with 142 companies. 

Source: OECD 

is  preparing 

Slovakia 
to  reform  higher 
education  in  order  to  improve  its  quality  and 
labour market relevance. The tertiary educational 
attainment  of  30-34  year-olds  rose  to  28.4 %  in 
2015  and  has  doubled  over  the  past  decade. 
However,  it  remains  well  below  EU  average  of 
38.7 %  and  the  national  EU  2020  target  of  40 %. 
The  proportion  of  young  adults  with  short-cycle 
tertiary  education  or  a  bachelor's  degree  is  lower 
than the OECD average, while the opposite is true 
for  those  who  hold  a  master’s  degree  (OECD, 
2016a).  Slovak  adults  with  tertiary  qualifications 
earn  70 %  more  than  those  who  attained  upper 
secondary  education  as 
level. 
Graduate  tracking  and  performance  agreements 
with  higher  education  institutions  are  lacking  at 
than  10%  of  recent 
present.  Finally,  more 
university  graduates  have  left  Slovakia.  This 
proportion 
is  especially  pronounced  amongst 
graduates  of  i.e.  medicine  and  technical  fields. 
(IFP, 2017). 

their  highest 

higher 

funding  and 

The sector is subject to a wide reform covering 
accreditation,  alignment  with  EU  standards,  as 
cooperation  with 
well  as 
employers. Support from the ESF is being offered 
to 
the 
for 
development 
professionally 
oriented  programmes.  An  amendment  to  existing 
higher  education  legislation  is  planned  to  be 
adopted  in  2017  and  to  enter  into  force  in  2018. 
Currently  there  are  also  two  related  strategies 

short-cycle, 

institutions 

education 

of 

26 

0.00.20.40.60.81.01.21.4CZSKITNLHUATFRPLSEBE (Fr.)SIDKEEFIDEBE (Fl.)ELLUPrimaryLower secondaryUpper secondary 
 
                                                           
3.3. INVESTMENT 

Quality of business environment 

Weaknesses in Slovakia’s business environment 
are  reflected  in  cross-country  comparisons. 
Slovakia  scores  significantly  worse  than  the  EU 
average  in  a  number  of  areas  relating  to  the 
responsiveness  of  the  administration  to  the  needs 
of small and medium-sized enterprises (SMEs). In 
particular,  these  are  the  time  needed  to  start  a 
business, 
administrative 
complexity  of 
procedures,  and 
the  burden  of  government 
regulations (European Commission, 2016f). These 
factors  can  inhibit  investment  and  growth  by 
discouraging  entrepreneurs 
starting  or 
expanding  a  business.  The  World  Bank's  2017 
Doing  Business  report  ranks  Slovakia  68th  out  of 
190 for starting a business — a slight deterioration 
compared to the 2016 report (World Bank, 2017). 

from 

the 

Construction  permits  are  comparatively  cheap 
but  take  a  long  time  to  obtain  in  Slovakia. 
Slovakia  performs  significantly  worse  than  the 
OECD  high-income  average  with  respect  to  the 
time  it  takes  to  obtain  a  construction  permit  for  a 
warehouse (286 vs 152 days), although the cost is 
very  low  (0.1 %  of  warehouse  value,  OECD 
average  1.6 %).  Overall,  according 
to  Doing 
Business  2017,  Slovakia  ranks  103rd  in  terms  of 
dealing  with 
construction  permits,  having 
improved  by  7  places  in  the  space  of  two  years. 
Although,  since  October  2015,  the  Construction 
Act  has  allowed  for  shorter  procedures  to  receive 
building  permits,  the  fast-tracking  applies  only  to 
infrastructure 
investments 
large-scale 
projects (European Commission, 2016a). 

and 

resolving 

Insolvency arrangements still represent a major 
business  hurdle.  According  to  Doing  Business 
2017, Slovakia is ranked 35th of 190 economies on 
the  ease  of 
insolvency.  Slovakia 
performs worse than the EU average in respect of 
the  procedure  for  resolving  insolvency,  both  in 
terms of the time needed (4 years for Slovakia and 
1.97  for  the  EU)  and  the  costs  (18 %  of  debtors’ 
estate  in  Slovakia,  10.3 %  in  the  EU).  Despite  a 
significant  improvement  since  2006,  the  average 
recovery  rate  on  claims 
low,  at  55.6 % 
(McCormack et al., 2016). While some features of 
Slovakia’s 
are 
competitive, (28)  the  country  still  lacks  fast-track 

framework 

insolvency 

is 

(28)  This  includes  the  management  of  debtor’s  assets,  the 
reorganisation proceedings index and creditor participation. 
See McCormack et al. (2016) for a detailed assessment. 

through 

the  debtor  by  an 

procedures  allowing  entrepreneurs  to  move  more 
quickly 
the  bankruptcy  processes. 
Moreover,  restructuring  proceedings  require  an 
insolvency 
evaluation  of 
practitioner,  which  may  deter  debtors 
from 
resorting  to  this  option.  In  September  2016  the 
Slovak  government  adopted  a  legislative  proposal 
aimed  at  reducing  the  costs  of  —  and  improving 
access  to  —  the  debt  discharge  procedure  and 
strengthening  the  regulation  of  executors,  which 
may  help  insolvent  debtors  to  be  given  a  second 
chance. 

Overall investment needs 

and 

facilitate 

infrastructure 

The  overall  outlook  for  public  and  private 
investment is favourable, and public infrastructure 
investment  ranks  as  a  key  policy  priority.  As  set 
out  in  the  ‘economic  situation’  section  and  the 
‘investment  box’,  investment  activity  is  expected 
to gain pace again in 2017 after having moderated 
in 2016. Public investment will play a pivotal role 
in shaping the medium-term investment outlook. A 
national  infrastructure  plan  for  2018-2030,  which 
aims to quantify investment needs in economic and 
social 
private 
investment,  should  be  completed  by  the  end  of 
2017. A roadmap towards developing the plan was 
still  pending  adoption  in  January  2017.  Working 
alongside  the  Ministry  of  Finance,  an  investment 
department,  under  the  newly  established  office  of 
the  Deputy  Prime  Minister  and  responsible  for 
investment  and  digitisation,  will 
coordinating 
follow  up  on  the  implementation  of  spending 
review  measures  under  the  ‘Value  for  Money’ 
project  (see  Section 3.1).  In  particular,  it  will 
assess  large  investment  projects  on  the  basis  of 
for  money.  The  cost-benefit  analysis 
value 
methodology  for  investment  project  appraisal  is 
planned to be developed by March 2017. 

investment  shock  using 

Raising  public  investment  is  likely  to  boost 
Slovakia’s  long-term  GDP.  Simulations  of  a 
public 
the  European 
Commission’s  QUEST  model  show  a  rising 
investment 
positive 
spending on GDP, productivity and real wages in a 
stylised scenario. (29) The simulations assume that 
Slovakia’s level of public investment (around half 

impact  of  higher  public 

(29)  QUEST 

is 

the  European  Commission’s 

global 
macroeconomic  model  used  for  macroeconomic  policy 
analysis and research.  

27 

 
 
                                                           
                                                           
3.3. Investment 

policy  attention.  Regional  economic  disparities, 
including 
in  unemployment  rates,  risk  being 
perpetuated  by  sometimes  poor  and  unevenly 
distributed  transport  infrastructure  (Graph  3.3.2). 
Road density is low in comparison to EU peers (at 
9 km/km2),  and  congestion  levels  and  average 
delays  are  significant.  While  motorways  and 
expressways  are  usually  in  good  condition,  the 
country  still  lacks  a  continuous  motorway  TEN-T 
link (D1) along the Bratislava-Kosice corridor and 
an  upgraded  rail  link.  Slovakia’s  ageing  rail 
network  restricts  train  speed,  while  various  lines 
appear to be virtually obsolete in view of the very 
low  frequency  of  trains  and  small  or  inexistent 
passenger volumes. 

A strategic plan for transport development until 
2030  aims  to  tackle  the  most  urgent  transport 
investment  needs,  but  various  factors  are 
causing  delays.  Transport 
investments  are 
prioritised  according  to  the  strategic  development 
plan and a technical and economic analysis geared 
towards  delivering  cost-effective  solutions.  New 
investment  needs  and  the  maintenance  of  existing 
infrastructure are required to ensure the long-term 
sustainability  of  transport  networks.  However, 
delays  in  project  preparation  and  adoption  — 
partly due to administrative capacity constraints — 
are  causing  projects  to  be  prioritised  according  to 
the  speed  of  approval,  but  not  necessarily  on 
intrinsic  merits.  The  construction  of  the  D4 
Bratislava  ring  road  will  be  financed  through  a 
public-private  partnership.  This  is  one  of  the  first 
projects where a blending of funds, including from 
the  European  Fund  for  Strategic  Investments 
(EFSI)  and  European  Structural  and  Investment 
Funds (ESIF), has been used. 

The  transport  policy  framework 
is  being 
strengthened  as  part  of  the  ‘Value  for  Money’ 
initiative,  potentially  yielding  efficiency  gains. 
As  set  out  in  the  section  on  public  finances  and 
taxation,  the  ‘Value  for  Money’  initiative  also 
includes a spending review for the transport sector. 
However,  the  review  only  deals  with  operational 
spending  on  transport.  The  efficiency  savings 
identified  in  this  (small)  part  of  the  overall 
transport  budget  are  low  (EUR  500 000),  in  part 
due  to  the  Transport  Ministry’s  lack  of  analysts 
and  the  lack  of  necessary  data.  A  fully  fledged 
spending  review  for  transport  investment  is  to  be 
completed in 2017. In view of pressing investment 
needs  and  limited  competition  in  the  Slovak 

of  which  is  transport-related)  increases  by  1 %  of 
GDP for 10 years, and that the extra investment is 
deficit-financed  at  currently 
low  government 
yields.  While  the  impact  on  GDP  is  limited  by 
increased  imports,  given  the  openness  of  the 
Slovak  economy,  GDP  after  five  years  is  1.1 % 
above  its  baseline  level  and  real  wages  are  0.7 % 
above their baseline, since a higher stock of public 
capital  raises  the  productivity  of  other  factors  of 
production. 

Graph 3.3.1:  Simulation of a public investment shock 
(deviation from baseline in pps. of GDP) 

Note:  Public investment is assumed to increase by 1% of 
baseline GDP over a period of 10 years, beginning in year t. 
Simulations conducted using the Commission's QUEST model. 
Source: European Commission 

Efficiency savings could help to raise the public 
capital  stock  at  minimum  cost.  The  above 
scenario  can  be  adapted  so 
that  the  public 
investment  shock  is  funded  through  efficiency 
savings  rather  than  through  a  higher  government 
deficit.  In  particular,  if  the  unit  costs  for  public 
investment  projects  were  reduced  —  including 
through  the  rigorous  application  of  the  ‘Value  for 
Money’  methodologies  —  the  savings  could  be 
used  to  fund  extra  investment  in  public  capital 
stock.  The  corresponding  rise  in  the  capital  stock 
would  still  be  productivity-enhancing,  thereby 
raising GDP levels in line with the above scenario, 
while being delivered at a lower fiscal deficit cost. 

Transport infrastructure 

Slovakia’s 
has 
significant  gaps  and  is  receiving  much-needed 

infrastructure 

transport 

28 

-0.200.20.40.60.811.2tt+1t+2t+3t+4GDPEmploymentReal wages 
 
3.3. Investment 

the  slow 

launch  of 

2015  and 
the  2014-20 
programming  period.  Concerning  the  2007-13 
programming period, the overall share of payments 
paid to the project beneficiaries from the Cohesion 
and  Structural  Funds  increased  from  90.6 %  in 
December  2015  to  97.6 %  in  December  2016. 
Nevertheless, the total amount of funds paid to the 
project  beneficiaries  remains  below  100%  of  the 
overall  allocation,  due  to  irregularities  identified 
by  audit  authorities  linked  notably  to  errors  in 
public  procurement  and  in  project  selection  and 
evaluation. 

of 

the 

2014-20 
The 
implementation 
programming  period 
is  picking  up  pace, 
although more slowly than expected. Despite the 
early adoption of the operational programmes, the 
designation  of  authorities  responsible  for  their 
implementation  was  still  not  completed  by 
December  2016,  and  the  publication  of  calls  for 
projects  has  fallen  behind  schedule.  Delays  in  the 
preparation  of  implementation  documents  and 
manuals, 
and 
continuity in the programme management, as well 
as  high  staff  turnover  linked  to  the  political  cycle 
are  the  main  factors  accounting  for  the  delay.  By 
December  2016  total  ESI  Funds  implementation 
on  the  ground  amounts  to  20 %  of  the  overall 
allocation  for  the  programmes.  Further  details  on 
EU  co-financed  investment  are  provided  in  Box 
2.1. 

insufficient 

capacity 

internal 

construction  sector,  cost  savings  for  transport 
investment could potentially be generated through 
better international benchmarking of unit prices.  

Graph 3.3.2:  Road network coverage and unemployment 

Source: Slovak Ministry of Finance 

into 

integrated 

first  steps 

Given  the  environmental  impact  of  transport 
networks,  an  effective  system  of  environmental 
impact assessments remains vital. Slovakia took 
in  applying  a  precautionary 
its 
approach (30)  to  mitigate  and  compensate  the 
negative  impact  of  transport  on  protected  areas 
(including  the  EU-wide  protected  Natura  2000 
network).  Environmental  assessments  are  not 
sufficiently 
the  multi-modal 
analysis and the cost-benefit analyses of individual 
projects.    Many  transport  projects  that  are  to  be 
co-financed 
have 
obsolete/non-compliant  assessments. (31)  Various 
critical  projects  need 
to  undergo  updated 
assessments  in  order  to  satisfy  the  development 
consent 
accordance  with 
in 
law. (32) 
environmental 
Restructuring the multi-stage development consent 
system would allow environmental assessments to 
be incorporated into a project’s life-cycle. 

assessment 

procedure 

impact 

EU 

the 

by 

EU funds  

There  was  a  significant  decrease  in  investments 
co-financed  from  EU  funds  in  2016  due  to  the 
closure  of  the  2007-13  programming  period  in 

(30)  Implementation of the EU Habitats and Birds Directives. 
(31)  Slovakia’s  legislation  was  found  not  to  be  compliant  with 
the Environmental Impact Assessment (EIA) Directive as a 
result  of  which  EU  infringement  proceedings  have  been 
launched  on  two  occasions  since  Slovakia's  accession  to 
the  EU.  This  has  had  an  impact  on  the  legality  of  the 
projects which fall under the EIA Directive and which were 
subject  to  development  consent  procedures  during  this 
period. 

(32)  The  amended  EIA  Act  (and  other  relevant  legislation) 

entered into force on 1 January 2015. 

29 

 
 
                                                           
 
3.3. Investment 

30 

 Box 3.3.1: Investment ChallengesSection 1. Macroeconomic perspective While remaining considerably above the EU average as a percentage of GDP in 2015 (23 % vs. 19.5 %), total investment in Slovakia (measured as gross fixed capital formation) has not fully recovered from the marked decline in the period following the financial crisis. General government investment remained broadly stable between 2009 and 2014 at an average rate of 3.7 % of GDP, and saw a marked rise to 6.3 % in 2015 as drawdowns of EU funds under the 2007-13 programming period ended. Meanwhile, decreasing private investment accounted for the entire fall in total investment between 2009 and 2014, and in 2015 stood at 16.7 % of GDP, only 0.3pps above its 10-year low of 2014. Based on the Commission 2016 autumn forecast, these trends are expected to reverse over the medium term, as  drawdowns of structural funds in the new programming period will normalise and lower public investment, while private investment (including in car manufacturing plants) is likely to accelerate somewhat. Section 2. Assessment of barriers to investment and ongoing reforms {TO BE UPDATED}  Main barriers to investment and priority actions underway 1/ A frequently changing legislative environment makes it difficult and costly for companies to comply with legislation, and legislative and regulatory processes are often viewed as insufficiently business-friendly. While the lack of evidence-based policy making is often noted, the framework for regulatory impact assessments is being strengthened. The lack of eGovernment services complicates business interactions with authorities. Perceptions of corruption and favouritism are rife, especially in public procurement. 2/ The justice system in Slovakia continues to face challenges with regard to its overall effectiveness. While efficiency has started to increase, the workload of the courts remains high. Efficiency aside, the quality of the justice system can be further improved, and persistently low levels of perceived judicial independence in Slovakia undermine the trust of citizens and business. 3/ According to the latest Annual Report on European SMEs, the availability of skilled staff and experienced managers is the second most pressing problem for Slovak SMEs. Slovakia's labour market recovery is likely to be causing labour supply pressures. Official statistics currently show about 40 000 vacancies, while recruitment companies cite far higher figures. After a period of deterioration and stagnation, dual education was rolled out in 2015, but results have yet to materialise. Regulatory/ administrative burdenCSRTaxationPublic administrationCSRAccess to financePublic procurement /PPPsCSRCooperation btw academia, research and businessJudicial systemCSRFinancing of R&D&IInsolvency frameworkBusiness services / Regulated professionsCompetition and regulatory frameworkRetailEPL & framework for labour contracts ConstructionWages & wage settingDigital Economy / TelecomEducation CSREnergyLegend:TransportNo barrier to investment identifiedCSRInvestment barriers that are also subject to a CSRSome progressNo progressSubstantial progressLimited progressFully addressedPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
 
 
 
 
3.4. SECTORAL POLICIES 

Small  and  medium-sized  enterprises  (SMEs) 
and diversification 

in 

through 

important 

SMEs  are 
for  growing  and 
diversifying  Slovakia’s  automotive-dominated 
economy.  The  Slovak  economy  is  heavily  geared 
towards  manufacturing,  particularly 
the 
automotive  sector.  Against  this  background,  a 
supportive  SME  environment  can  promote 
diversification 
grass-roots 
entrepreneurship. Slovakia is in a good position to 
promote  growth  via  SMEs;  firm  birth  and  death 
rates in Slovakia are higher than in most other EU 
countries. (33)  The  start-up  rate  of  employer 
enterprises  stood  at  36.1 %  in  2012-13  —  one  of 
the highest in OECD countries (OECD, 2016b). At 
the  same  time,  the  business  survival  rate  of  five-
year-old  Slovak  enterprises  in  2014  was  37.5 %, 
somewhat below the EU average of 44.3 %. (34) 

‘Point  of  Single  Contact’ 

Support  services  for  SMEs  have  not  yet 
exhausted  their  full  potential.  For  example,  the 
efficiency  and  speed  of  the  services  delivered  by 
the 
for  start-up 
procedures and other government services are sub-
optimal;  various  databases  still  need  to  be  linked 
up better to ensure the successful application of the 
so-called  ‘once-only’  principle;  and  the  one-stop-
shops  dealing  with  administrative  procedures  for 
start-ups do not cover the full spectrum of services 
to enterprises. 

However,  targeted  support  for  SMEs  is  being 
improved  and  regulatory  impact  assessments 
(RIAs)  enhanced.  The  Act  on  the  Promotion  of 
SMEs  entered  into  force  on  1 January  2017.  This 
opens  the  way  for  the  application  of  the  Small 
Business Act and the Entrepreneurship 2020 action 
plan,  and  should  help  to  ensure  progress  on 
implementing  SME-friendly  policies.  The  bill 
clarifies  coaching  and  mentoring  and provides for 
better-structured  and  simpler  support  schemes  for 
SMEs.  To  measure  the  regulatory  impact  of  the 
new rules on SMEs, it introduces the SME test, for 
which pilot testing started in 2016. The test forms 
part of the RIA procedure which was strengthened 
in  2015  and  2016.  The  new  RIA  introduces  the 
Standing  Working  Commission  of  the  Legislative 

Council of the Government for Assessing Selected 
Impacts  and  mandatory  consultations  with  the 
business sector whenever a regulatory proposal has 
a  potential  impact  on  businesses.  However,  risk 
assessments  are  not 
in  RIAs,  and 
implementation  and  enforcement  of  existing  rules 
is  not  covered  by  the  RIA  methodology.  Overall, 
given that it is still in its infancy, the effectiveness 
and efficiency of the RIA framework remains to be 
seen. 

included 

A  long-term-strategy  to  lower  the  regulatory 
burden on companies is yet to be formulated. In 
the  2016  national  reform  programme,  the  Slovak 
government pledged to adopt a long-term strategy 
to  reduce  the  regulatory  burden  on  businesses  in 
the  methodology  for 
Slovakia,  and  amended 
conducting  impact  assessments  of  legislative  and 
non-legislative  documents.  However,  this  strategy 
has  not  been  formulated  and  is  postponed  to 
December  2017.  An  inter-ministerial  working 
group  for  Doing  Business,  led  by  the  State 
Secretary  of  the  Economy  Ministry,  was  recently 
set  up  and  is  expected  to  present  by  June  2017 
proposals  for  measures  to  improve  the  business 
environment.  

in 

A  new  national  business  centre  is  planned  to 
support  enterprises.  The  centre  aims  to  provide 
comprehensive  support 
to  entrepreneurs  and 
SMEs. Pilot testing of the centre got under way in 
mid-2016 but full operation and the replication of 
regions  have  been 
the 
business  centres 
postponed  due  to  delays  in  launching  the  relevant 
national  project  financed  from  the  Operational 
Programme  for  research  and  innovation  (OP  RI). 
For  the  very  first  time,  Slovakia  received  a 
substantial financial allocation of EUR 400 million 
from  the  ESIF  for  dedicated  support  of  SMEs. 
Although  the  first  calls  have  been  launched,  a 
number  of  national  projects  from  the  Operational 
Programme  for  research  and  innovation  (R&I)  to 
promote  the  growing,  scaling-up,  internalisation 
and  competitiveness  of  SMEs  have  not  yet 
materialised. 

Regulated Professions 

(33)  The  firm  birth  rate  in  2014  was  19.8 %  (EU  average 
10.6 %), and the death rate in 2013 (latest data) was 14.6 % 
(EU: 9.6 %); for definitions see OECD, 2016b. 

(34)  Data  missing  for  Portugal,  Malta,  Croatia,  Ireland  and 

Belgium. 

Restrictive  barriers  remain 
in  regulated 
professions.  The  level  of  restrictiveness  is  higher 
in  Slovakia  than  the  EU  weighted  average  for  all 
the professions recently reviewed by the European 

31 

 
 
                                                           
3.4. Sectoral policies 

greater use of EU funds; however, it remains to be 
seen if public R&D investment can be maintained 
at  its  2015  high  as  calls  to  draw  funds  from  the 
new  operational  R&I  programme  are  only  just 
being 
launched.  Business  R&D  expenditure 
remained virtually unchanged at 0.33 % of GDP in 
2015, one of the lowest levels in the EU and well 
below  Slovakia’s  indicative  target  of  0.8 %  for 
2020. 

Graph 3.4.2:  R&D intensity in Slovakia in 2000-2015 

Note: Excludes private non-profit R&D spending. 
Source: European Commission 

Slovakia’s science base still ranks at the low end 
compared  with  other  EU  Member  States. (36) 
The low volume of business R&D activities in the 
country  is  also  reflected  in  the  low  proportion  of 
researchers  employed  by  business  relative  to  total 
employment  (1 %  in  2014,  vs  an  EU  average  of 
3.6 %). While Slovakia saw an improvement in its 
overall innovation performance between 2012 and 
2014  according  to  the  innovation  index  of  the 
European 
still 
underperforms by EU standards and is classed as a 
(European  Commission, 
moderate 
2016d).  Poor  links  between  the  public  sector, 
research  institutions  and  businesses  are  evident 
from 
public-private 
number 
co-publications  per  million  inhabitants  (8.1,  EU: 
in 
33.9)  and 

the  below-EU-average  scores 

Scoreboard, 

Innovation 

innovator 

low 

the 

of 

it 

for 

lawyers 

is  highest 

Commission  (European  Commission,  2016c). (35) 
(see 
Restrictiveness 
Graph 3.4.1),  and  simulations  suggest 
that  a 
indicator  for 
the  restrictiveness 
lowering  of 
lawyers to the EU average would boost the number 
of  firms  (+0.7 %)  while  lowering  profitability  by 
2 %.  However,  for  all  the  professions  reviewed, 
the business churn (or turnover) rate in Slovakia is 
higher than or similar to the EU average, arguably 
indicating  relatively  high  levels  of  dynamism  and 
competition  within  regulated  professions  in  the 
country.  The  national  action  plan  submitted  by 
Slovakia in connection with the mutual evaluation 
of  regulated  professions  announces  very  limited 
changes  to  the  existing  restrictions  governing 
access to regulated professions. 

Graph 3.4.1:  Summary restrictiveness indicator for 

regulated professions (2015) 

Source: European Commission 

Research and innovation strategy 

In  spite  of  rising  public  R&D  expenditure, 
business R&D investment remained unchanged 
at  relatively  low  levels  in  recent  years.  Overall, 
R&D  spending  increased  from  an  annual  average 
of 0.83 % of GDP in 2012-2014 to 1.18 % in 2015 
(EU  average:  2.03 %  of  GDP).  Public  R&D 
spending  accounted  for  the  entire  increase  in 
recent  years  (Graph  3.4.2)  and  was  driven  by  the 

(35)  Regulatory barriers entail, for example, reserved activities, 
shareholding  and  voting  requirements,  multidisciplinary 
membership, 
restrictions, 
authorisation 
indemnity 
insurance. 

chamber 
and  professional 

compulsory 
schemes 

(36)  For  instance,  in  2013  Slovakia  ranked  23rd  among  EU 
Member  States  on  the  ‘share  of  national  publications 
within  the  top  10 %  most-cited  publications  worldwide’ 
indicator  (5.5  vs  EU  average  of  10.5),  with  no  significant 
progress made between 2007 and 2013. 

32 

0.01.02.03.04.05.0AccountantArchitectCivil engineerLawyerPatent agentReal estate agentTourist guideEUSK0.00.10.20.30.40.50.60.70.80.91.01.11.22000200120022003200420052006200720082009201020112012201320142015R&D expenditure as % of GDPBusinessPublic 
 
                                                           
 
                                                           
3.4. Sectoral policies 

of  the  Academy  into  a  public  organisation,  which 
was  intended  to  improve  cooperation  with  the 
business  sector,  has  been  postponed.  These 
continual  delays  hamper  the  effective  and  timely 
implementation of the reforms envisaged and slow 
down investment from the Structural Funds. 

Further  general  plans  in  support  of  R&D  are 
being developed. The Slovak government adopted 
a  decision  in  2016  on  the  launch  of  three  new 
programmes  to  be  implemented  by  the  Slovak 
Research  and  Development  Agency  in  2016-2019 
with a budget of EUR 92 million. The programmes 
are  linked  to  the  national  smart  specialisation 
strategy  and  the  Horizon  2020  European  funding 
programme.  They  aim  in  particular  to  provide 
through 
support 
cooperation  with  public  research  organisations, 
and to support projects which received high scores 
in  the  Horizon  2020  evaluation  but  were  not 
allocated funding. Scientists will receive assistance 
with  preparing  proposals  for  grants  from  the 
European Research Council. 

to  business  R&D, 

including 

Energy, resource efficiency and pollution 

and 

energy 

intensity 

intensity  of 

Slovakia’s 
energy 
dependence are relatively high. In 2015 primary 
and  final  energy  consumption  showed  a  slight 
increase on the previous year (39) (rising by 0.8 % 
to  10.3 Mtoe, 
to  15.38  Mtoe  and  by  3 % 
respectively).  The  energy 
the 
economy,  which  serves  as  a  proxy  indicator  for 
overall  energy  efficiency,  also  improved  slightly 
but still consistently ranks among the highest in the 
EU and is approximately 80 % higher than the EU 
average (Graph 3.4.3.). (40) The country's relatively 
high  energy  intensity  is  coupled  with  high  energy 
dependence:  58.7 %  of  the  energy  consumed  in 
2015  came  from  imports,  a  slight  increase  on  the 
previous year. (41) 

The  electricity  market  is  distorted  and  poses 
hurdles  to  new  production  and  cross-border 
transmission. Electricity prices are high compared 
to  neighbouring  countries  and  include  several 
politically  motivated  price  components,  such  as  a 
for  domestically  produced  but 
feed-in-tariff 

(39)  Eurostat. 
(40)  ibid.  In  2014  Slovakia  had  the  sixth  highest  energy 
intensity  in  the  EU with  220.1 kgoe/EUR 1 000  compared 
to an EU average of 121.7 kgoe/EUR 1 000. 

(41)  ibid. 

indicators  for  commercial  and  non-commercial 
research outputs in Slovakia. 

Upgrading Slovakia’s Research and Innovation 
(R&I)  performance  requires  improvements  in 
the  governing  policy  framework.  The  slow 
progress  made  towards  a  more  efficient  and 
attractive  R&I  system  risks  hampering  Slovakia’s 
transition from a cost-based to a more innovation-
driven  growth  model.  The  underperformance  of 
the public research system also seems to be linked 
to inefficiencies in public funding. This constitutes 
a  bottleneck  to  growth,  and  the  lack  of  sufficient 
public-private  cooperation  is  hampering  business 
R&D  investment.  (37)  The  main  challenges  are 
linked  to  the  need  to  improve  governance  in  R&I 
and  to  increase  coordination  among  governing 
institutions for developing and implementing R&I 
policy. 

to 

innovation  vouchers 

Support  measures  for  business  R&I  exist,  but 
some  remain  relatively  small-scale.  Several 
national  initiatives  such  as  the  development  of 
clusters  and 
foster 
cooperation  between  the  research  and  business 
sectors  received  only  limited  funding.  A  special 
125 %  tax  super-deduction  for  private  companies 
investing  in  R&I  entered  into  force  in  January 
2015.  However,  it  is  not  used  extensively  by 
companies, which claim that the eligibility criteria 
are  unclear  and  the  scheme  is  not  generous 
enough. (38)  Most  of  the  measures  in  the  pipeline 
are  to  be  financed  by  the  R&I  Operational 
Programme,  but  many  have  been  delayed  and 
some  calls  for  demand-driven  projects  were  only 
published in late 2016. 

Progress on implementing R&I reforms is slow. 
The  national smart  specialisation  strategy  adopted 
in  November  2013  aims  to  identify  strategic 
specialisation  areas  and  supporting  measures,  and 
to  put  in  place  a  modernised  R&I  governance 
structure.  However,  the  action  plan  to  implement 
the  strategy  was  again  postponed.  In  2016  the 
Slovak  Academy  of  Sciences 
launched  an 
evaluation  of  its  institutions  with  a  view  to 
improving the quality of research. The conversion 

(37)  For  instance,  Slovakia  ranks  19th  among  EU  Member 
States  on  the  ‘public-private  co-publications  per  million 
population’  indicator  (8.1  vs  EU  average  of  34),  with  no 
progress made between 2008 and 2014. 

(38)  E.g.  in  the  Czech  Republic,  companies  can  deduct  200 % 

of R&I expenses. 

33 

 
                                                           
                                                           
3.4. Sectoral policies 

standards (44) for nitrogen dioxide (NO2) in one air 
quality  zone  (Prešov)  and  particulate  matter 
(PM1 0)  in  seven  air  quality  zones.  Furthermore, 
target  values  and  long-term  objectives  regarding 
ozone  concentrations  are  exceeded  in  two  air 
quality  zones.  The  resumed  operation  of  a 
previously  decommissioned  block  of  the  Novaky 
thermal power plant risks worsening the country's 
air quality further. 

Municipal  waste  management  remains  a 
challenge  despite  significant  support  from  EU 
funds.  Municipal  waste  generation  in  Slovakia 
increased in 2015, although it remained well below 
the  EU  average  (329  kg/y/inhabitant  compared  to 
around 477 kg/y/inhabitant). (45) Slovakia still has 
a high landfilling rate of municipal waste (68 % in 
2015  compared  to  an  EU  average  of  25 %)  and  a 
low  recycling  rate  (15 %  in  2015;  EU:  45 %).  A 
new law on waste entered into force on 1 January 
2016. It has the potential to improve the circularity 
of  the  economy,  in  particular  via  the  extended 
producer responsibility scheme. In 2015, Slovakia 
adopted  a  new  waste  management  plan  for  2016-
2020,  with  provision  made  for  a  retrospective 
evaluation.  This  showed  that  several  objectives 
had  not  been  reached,  including  recycling  targets. 
It is not yet clear whether the measures will enable 
Slovakia  to  achieve  the  2020  objectives  of  the 
Waste  Framework  Directive  (i.e. 50 %  recycling 
target by 2020) and the more ambitious objectives 
of the Circular Economy package. (46) 

(44)  Directive 2008/50/EC and Directive 2004/107/EC. 
(45)  Differences exist between national and Eurostat figures. 
(46)  A full assessment of the main challenges and opportunities 
in respect of Slovakia's environmental policies is set out in 
the  European  Commission  staff  working  document 
Environmental  Implementation  Review  2016,  Country 
Report Slovakia. 

environmentally damaging lignite. The connection 
of  new  sources  to  the  network  is  perceived  as 
difficult,  and  since  2013  a  ‘stop  status’  prohibits 
the  connection  of  new  renewable  sources  to  the 
grid.  The  national  arrangements  for  congestion 
management and bidding zone definition in central 
actual 
Europe  do  not  necessarily 
trade 
reducing  possibilities 
congestion, 
electricity  across  borders.  Finding  a  joint  regional 
solution  would  be  likely  to  benefit  all  affected 
neighbours.  The  complex,  opaque  regulatory 
framework 
between 
stakeholders  in  the  energy  market,  hampering  the 
production  and  distribution  of  renewable  energy 
and  the  transition  to  clean  energy  technologies. 
Recent changes in the setting of distribution tariffs 
indicate continued political and business influence. 

reflect 
to 

complicates 

relations 

Graph 3.4.3:  Primary energy intensity (toe/GDP) 

Note: Primary energy consumption divided by GDP, 
expressed in toe per millions of euros of GDP, in chain linked 
volumes (2010) 
Source: European Commission 

Air  quality  remains  troubling.  Although  the 
emission  of  several  types  of  air  pollutants  has 
decreased  significantly  in  Slovakia (42)  due  to 
structural  changes  in  industry  over  the  previous 
decade,  air  pollution  ranks  as  one  of  the  main 
Slovakia. (43) 
environmental 
Regarding  the  currently  applicable  limits,  in  2014 
the  Slovak  authorities  communicated 
the 
European  Commission  breaches  of  EU  air  quality 

challenges 

in 

to 

(42)  EIONET  Central  Data  Repository  and  Air  pollutant 

emissions data viewer (NEC Directive) 

(43)  http://www.minzp.sk/iep/publikacie/ekonomicke-

analyzy/tri-vyzvy-slovenskeho-zivotneho-prostredia.html  

34 

05010015020025030035040045020002002200420062008201020122014EUSK 
 
                                                           
                                                           
3.5. PUBLIC ADMINISTRATION 

Human  resource  management  in  the  public 
administration 

Slovakia  faces  challenges  in  modernising  its 
public  administration.  Shortcomings  in  public 
administration  have  been  identified  as  one  of  the 
obstacles  to  improving  the  business  environment 
(European  Commission,  2016a).  A  low  level  of 
cooperation  across  ministries  hampers  strategic 
planning  and  blurs  policy  objectives.  Political 
influence and decentralised recruitment procedures 
hinder  transparency  and  affect  the  quality  of  the 
service.  The  selection  and  appointment  of  the 
chairman  and  vice-chairmen  of  various  regulatory 
authorities  have  at  times  been  influenced  by 
political 
the 
regulatory 
achievement 
environment  guaranteed  by 
independent  and 
accountable regulators. 

interests,  which  may 

high-quality 

impede 

of 

a 

A  new  Civil  Service  Act  could  offer  some 
improvements. The Act was adopted in February 
2017  and  contains  provisions  to  reduce  political 
influence  on  public  administration, 
increase 
transparency and raise the quality and mobility of 
staff.  It  also  includes  new  principles  for  public 
service.  Some  provisions  are  scheduled 
for 
adoption,  e.g.  the  mandatory  retirement  of  public 
servants  at  65  (by  2017),  compulsory  training  for 
managers (by 2018) and the launch of an electronic 
register  of  all  civil  service  positions  by  January 
2019. A new, politically independent Civil Service 
Council  will  be  set  up  to  coordinate  and  monitor 
implementation  of  the  new  Civil  Service  Act  and 
supervise the code of ethics for civil servants. 

The  regional  public  reform  (ESO)  is  making 
progress. It aims to raise the efficiency and quality 
of services in the newly created one-stop shops in 
most  regions.  Since  implementation  is  still  under 
way,  it  has  not  yet  delivered  tangible  results  in 
terms  of  optimising  human  resources.  The  human 
resources  strategy  implemented  since  2015  is 
under  evaluation  by  the  Slovak  authorities.  The 
Civil  Service  Act  and  other  recent  measures  will 
need  to  be  carefully  monitored  in  terms  of  their 
implementation  and  in  the  light  of  the  impact 
assessment (European Commission, 2016a).  

Public Procurement 

Public  procurement  outcomes  point 
to  a 
significant  share  of  non-competitive  tendering 

operations. Recent data show that there was only 
a single bidder in 31 % of public tenders in 2016. 
Furthermore, 
the  Slovak 
in  7 %  of  cases 
contracting authorities awarded a contract without 
having previously publishing a call for tender — a 
figure  that  is  somewhat  above  the  EU  average  of 
4 %  (European  Commission,  2016e).  While  these 
results show a certain degree of improvement from 
the  preceding  year,  they  nonetheless  suggest  a 
considerable 
in  public 
lack  of  competition 
procurement processes. 

fully 

Public  procurement  control  and  transparency 
mechanisms  are  not 
functional.  A 
Eurobarometer  survey  also  notes  that  54 %  of 
managers  of  Slovak  companies  participating  in 
public  tenders  said  that  corruption  had  prevented 
the  company  from  winning  a  public  tender  or 
contract,  compared  to  an  EU  average  of  34 % 
(European  Commission,  2015b).  The  above-
average  perception  of  public  procurement 
manipulation 
the 
comparatively low number of persons convicted of 
this  crime.  In  2015  the  Office  of  the  Prosecutor 
General  reported  only  four  such  cases  (General 
Prosecutor's Office, 2016, p. 41).  

contrast 

stands 

to 

in 

Slovakia  transposed  the  modernised  public 
procurement and concession directives on time, 
i.e.  by  16 April  2016.  The  role  of  the  Public 
Procurement  Office  has  been  strengthened,  in 
particular  by  allowing  ESIF  beneficiaries 
to 
request an ex ante assessment of tender documents 
and  by  establishing  mandatory  verification  of 
public  procurement  procedures  before  contracts 
are signed by beneficiaries of ESIF funding above 
EU thresholds. 

the  revamp  of 

E-procurement  is  making  progress  but  the  IT 
environment  is  still  sub-optimal.  The  Public 
Procurement  Office  announced  an  e-procurement 
strategy  in  May  2016  and  updated  it  in  January 
2017.  In  2016, 
the  central 
e-procurement  system  (EVO)  got  off  the  ground 
with  a  view  to  bringing  the  system  into  line  with 
the  corresponding  2014 
the  requirements  of 
directive and providing users with a wider range of 
tools. The current rate of use of the EVO system is 
low  (at  4 %),  hampering  the  improvement  of  the 
public procurement process in Slovakia in terms of 
cost,  time  and  value  for  money.  Since  mid-2014, 
Slovakia  has  been  using  a  second  e-procurement 
system,  the  electronic  contracting  system  (EKS), 

35 

 
 
3.5. Public administration 

for  off-the-shelf  purchases.  This  system  has  the 
advantage  of  being  simple  and  quick  when  it 
comes to concluding small and standard purchases 
it  allows  for  strict  anonymity  between 
and 
purchasers  and  buyers.  Nevertheless,  a  number  of 
questions  have  been  raised 
its 
off-the-shelf  format, 
its  mandatory  character, 
alleged  collusive  practices  (despite  the  in-built 
anonymity), dumping offers and problems with the 
automatic generation of contracts by the system. 

in  view  of 

Improvements  in  procurement  staffing  and 
training  appear  to  be  in  the  pipeline.  The  staff 
capacity  of  the  Public  Procurement  Office  has 
been  boosted  by  25  posts  to  help  cope  with  new 
tasks.  Two  training  programmes  were  set  up  in 
2016 to address the professional training needs of 
procurement officers — one for ESIF staff and one 
for 
the  contracting  authorities.  The  Public 
Procurement  Office  organised  further  training 
courses  following  the  adoption  of  the  new  Public 
Procurement  Law  and  started  to  offer  e-learning 
tools  on  its  website.  The  main  areas  in  need  of 
improvement  concern 
the  ‘most 
economically advantageous tender’ award criterion 
instead of the lowest-price criterion, the drafting of 
technical  specifications  using 
functional  and 
objective criteria, and the use of life-cycle costing 
together  with  other  environmental  and  social 
aspects. 

the  use  of 

little 

interest 

incentives 

Institutional  ownership  and 
for 
efficient  procurement  remain  relatively  low. 
Although  certain  ministries  already  act  as  central 
purchasing  bodies,  in  particular  the  Ministry  of 
the  Ministry  of  Health,  Slovak 
Interior  and 
contracting  authorities  show 
in 
various  forms  of  central  or  joint  purchasing 
activities  that  usually  bring  transaction  savings, 
the  risk  of 
economies  of  scale  and  reduce 
challenges 
decision. 
the 
against 
Procurement  is  done  in  a  collaborative  way  in 
around  4%  of  the  cases  in  Slovakia  —  somewhat 
below the EU average of 9 %. While it remains to 
be  seen  whether  the  ‘Value  for  Money’  initiative 
will  create  greater  incentives  for  cost-effective 
procurement,  initial  signs  are  promising.  Use  of 
the  lowest-price  criterion  (93 %  in  2015)  and 
single bid procedures (38 % in 2015) remains high 
in  healthcare  procurement.  Following  numerous 
incidents involving illicit procurement practices in 
the  health  sector,  including  overpriced  purchases 
services  and  medical 
of  hospital  catering 

tender 

indicate 

equipment such as CT scanners in 2014 and 2015, 
the  Ministry  of  Health  has  been  preparing  a  price 
benchmarking  system,  and  organising  centralised 
purchasing  of  core  technologies  in  2016.  Initial 
results 
in 
procurement  outcomes.  Slovakia  faces  a  recurrent 
problem  with  ICT  contracts 
that  have  been 
awarded  with  unbalanced  intellectual  property 
rights  in  favour  of  suppliers  which  prevent  the 
contracting  authorities  from  retendering 
their 
contracts in open competition (vendor lock-in). (47)  

improvement 

slight 

a 

Justice System 

Slovakia  remains  one  of  the  lowest-ranked  EU 
Member  States  in  terms  of  the  perceived 
independence  of  the  judiciary,  and  further 
concerns  have  emerged.  The  country  improved 
only  marginally  compared  to  the  previous  year  in 
terms  of  perceived  judicial  independence. (48)  In 
2016 the Slovak authorities conducted a survey on 
the  general  level  of  trust  in  the  justice  system 
which confirmed this slight improvement (Council 
for the Judiciary, 2016). However, the persistently 
low  levels  of  perceived  independence  in  Slovakia 
continue  to  be  a  concern  as  this  undermines  the 
trust  of  citizens  and  businesses.  The  screening  of 
the suitability of judges on the basis of information 
from  the  Slovak  National  Security  Authority 
continues  to  raise  concerns  in  terms  of  the 
independence of the judiciary and the proceedings 
before  the  Slovak  Constitutional  Court  are  still 
pending. (49)  This  has  caused  a  bottleneck  in  the 
procedures to recruit judges. The failure to appoint 
candidates  to  three  vacant  posts  in  the  Slovak 
Constitutional Court remains a concern. (50) 

Slovakia  has  made  efforts  to  improve  the 
effectiveness of its justice system, both in terms 
of  efficiency  and  quality.  The  government  has 
identified  justice  reform  as  a  priority  in  its  2016 
manifesto.  Court  data  confirm  that  the  efficiency 

(47)  Typically,  customers  are  obliged  to  renegotiate  crucial 
intellectual  property  rights  prior  to  the  end  of  their 
contracts  before 
to  genuine 
competition. 

these  can  be  opened 

(48)  Slovakia ranks 120 out of 138 compared to 125 out of 140 

previously (World Economic Forum, 2016). 

(49)  For further details, see European Commission (2016a). 
(50)  In  early  2017  the  President  of  the  Slovak  Republic 
requested  an  opinion  from  the  Venice  Commission  of  the 
Council of Europe on questions related to the appointment 
of judges to the Constitutional Court. 

36 

 
                                                           
facilitate 

of  the  court  system  continues  to  improve. (51)  In 
particular,  clearance  rates  for  litigious  civil  and 
commercial  cases,  i.e.  the  ratio  of  the  number  of 
incoming  cases,  have 
resolved  cases  over 
improved  significantly,  thanks  in  part  to  the  drop 
in  the  number  of  incoming  and  pending  cases 
(European  Commission,  2017).  However, 
the 
average time needed to resolve cases is among the 
highest in the EU and is still rising (Graph 3.5.1).  
In  2016,  a number  of  ICT  projects were  launched 
to  accelerate  procedures  and 
the 
interaction  of  between  courts  and  the  general 
public.  The  revised  Civil  Procedural  Law  entered 
into  force  on  1 July  2016  and  could  bring  with  it 
additional  efficiency  gains.  The  same  may  hold 
true  for  the  new  Act  on  consumer  arbitration  and 
the  amended  Act  on  arbitration  by  providing 
further  incentives  to  pursue  alternative  dispute 
resolution  methods.  Amendments 
the 
enforcement  procedure  aim  at  improving  the 
efficiency  and  specialisation  by  concentrating 
these  proceedings  before 
court. 
Introducing  a  fully  electronic  payment  order 
should  further  facilitate  enforcement.  However,  it 
is  still  too  early  to  assess  the  situation  since  the 
reforms  were,  for  the  most  part,  adopted  only 
recently. 

single 

to 

a 

Best practices are not always adhered to in the 
justice  system.  Slovakia  is  still  making  very 
limited use of surveys among court users and legal 
professionals,  and  judicial  training  is  not  fully 
2017a). 
developed 
Moreover, 
reforms 
financing  of 
continues  to  rely  heavily on EU  Structural Funds, 
which  raises  sustainability  concerns  in  the  longer 
term. Staff in the judiciary also report a persistent 
lack of qualified administrative support personnel. 

(European  Commission, 
justice 
the 

(51)  Regarding past improvements in the area of administrative 

justice see European Commission (2016a), p. 35. 

3.5. Public administration 

Graph 3.5.1:  Time needed to resolve litigious civil and 
commercial cases (first instance, in days) 

Note: Missing or incomplete data for BE, BG, CY, IE, NL, UK 
Source: European Commission 

law 

capacity 

enforcement 

Consumer 
in 
Slovakia  remains  limited,  as  reflected  in  poor 
assessments  given  by  consumers  and  retailers. 
Slovakia has one of the highest percentages in the 
EU  of  retailers  and  consumers  reporting  unfair 
commercial practices (47 % and 30 % respectively 
compared  with  30 %  and  17 %  for  the  EU  in 
2016).  Perceived  compliance  with  consumer 
regulations, as evaluated by retailers, is among the 
lowest  in  the  EU.  This,  combined  with  other 
factors, means that Slovakia has one of the lowest 
the  compliance  and  enforcement 
scores  on 
(European  Commission, 
indicator 
composite 
2017b). 

Corruption  

Corruption remains one of the main barriers to 
doing  business  in  Slovakia.  The  problem  is 
particularly acute in the area of public procurement 
and  in  interactions  with  the  public  administration. 
According  to  the  World  Economic  Forum  (2017), 
out  of  138  countries  surveyed,  Slovakia  ranks 
122nd on the diversion of public funds and 89th on 
irregular  payments  and  bribes,  placing  it  among 
the  worst  performers  in  the  EU  (Graph  3.5.2).  In 
2015,  12 %  of  managers  reported  that  they  had 
been  asked  or  expected  to  pay  a  bribe  when 
dealing  with  the  public  administration  (European 
Commission,  2015b).  The  World  Bank  has  also 
reported weak control of corruption (World Bank, 

37 

0100200300400500600700800LTLUEEATHUROSECZDKDEPLSILVFIESELFRHRPTSKITMT20132014 
 
                                                           
 
3.5. Public administration 

2016). Evidence is mixed in terms of the trajectory 
of corruption perceptions in recent years. (52) 

Graph 3.5.2:  Perceived incidence of irregular payments 

and bribes (Index, 2016) 

force  and  hinder  the  investigation  of  sensitive  or 
high-level corruption cases. Available data further 
point  to  the  pivotal role of  the public prosecutor's 
office  in  punishing  corruption  crimes,  as  only  a 
minority  of  sentences  are  decided  by  the  courts. 
The  relatively  low  degree  of  transparency  at  the 
level  of  the  prosecutor's  office  hinders  public 
scrutiny  over  the  investigation  and  punishment  of 
corruption and abuses of power. 

whistleblowers 

the  existence  of 

far,  only  11  people 

Legislation  protecting  whistleblowers  entered 
into  force  in  2015,  but  its  impact  has  been 
received 
modest.  So 
institutional protection after making allegations of 
corruption  at 
(Transparency 
the  workplace 
International  Slovakia,  2016).  Low  public 
awareness  of  the  protection  available  seems  to  be 
one  of  the  main  reasons  for  this.  A  recent  survey 
revealed  that  only  26 %  of  survey  respondents 
legislation 
were  aware  of 
(Transparency 
protecting 
International  Slovakia,  2016).  Another  qualitative 
study  suggested  that  labour  inspectorates  (as  the 
primary  guardians  of  whistleblowers)  tended  to 
react  slowly  and  often  failed  to  properly  identify 
the need for protection (Transparency International 
Slovakia,  2015).  Finally,  the  obligation  to  report 
suspicions  to  the  employer  rather  than  to  an 
independent  external  body,  coupled  with  the 
limited protection offered by legislation, may lead 
to  fear  of  repercussions  and  discourage  people 
from  reporting 
illicit  behaviour  (Hospodárske 
Noviny, 2016). 

A  new,  ambitious  act  against 
letterbox 
companies  marks  an  important  step  towards 
greater  transparency  and  less  corruption. The 
legislation  will  enter  into  force  in  2017  and  will 
require all legal persons accessing public resources 
to  register  their  full  ownership  structure  down  to 
the final beneficiary in a new register accessible to 
the  public.  This  legislation  should  allow  for  more 
oversight  over  the  flow  of  public  resources  to 
private  persons  and  may  prove  a  useful  tool  for 
identifying  conflicts  of  interest  and  uncovering 
money laundering and bankruptcy or restructuring 
fraud. 

Note: Possible scores range from 1 (worst) to 7 (best) 
Source: World Economic Forum 

Prosecutions  for  corruption-related  offences 
have  risen  but  are  still  low  compared  to  the 
high  perceived  levels  of  corruption.  Criminal 
statistics  show  that  in  2015,  163  individuals  were 
charged with crimes related to corruption, 53 were 
prosecuted and 118 were convicted — a fraction of 
the  numbers  in  the  case  of  economic  crimes 
(mostly 
(General 
insurance 
Prosecutors  Office,  2016,  p.  45).  The  structure  of 
sentences  also  suggests  a  lenient  approach  to 
corruption-related  offences.  Of  the  118  people 
convicted,  only  10  faced  imprisonment,  while  the 
majority of cases (67) were concluded with a plea 
(General  Prosecutors  Office,  2016, 
bargain 
p. 79-80).  Charges  have  very  rarely  been  pressed 
against high-ranking officials. 

tax  and 

fraud) 

A  lack  of  transparency  and  accountability  in 
the police and public prosecutor's office may be 
impeding  the  fight  against  corruption.  As  the 
chief  of  police  and  the  police  inspection  are 
appointed  and  directly  responsible  to  the  interior 
minister,  rather  than  the  cabinet  as  a  whole,  this 
may reduce the level of independence of the police 

(52)  Relevant  World  Bank  indicators  show  no  improvement 
between 2014 and 2016 data vintages, while Transparency 
International's  Corruption  Perceptions  Index  shows  a 
steady  improvement  from  a  score  of  46  in  2012  to  51  in 
2015; in 2016 Slovakia's score remained unchanged at 51.  

38 

234567FIDKSELUIENLUKEEATBEFRDESIPTLTPLESMTLVCYCZITHUHRELBGSKRO 
 
                                                           
 
ANNEX A 

Overview Table 

Commitments 

2016 Country-specific recommendations (CSRs) 

CSR 1:  

 

Improve  the  cost-effectiveness  of  the  healthcare 
system.  

  Take measures to increase tax compliance. 

CSR 2:  

 

Improve  activation  measures  for  the  long-term 
unemployed  and  other  disadvantaged  groups, 
including  individualised  services  and  targeted 
training.  

Summary assessment (53) 

limited  progress 

Slovakia  has  made 
in 
addressing  CSR 1  (this  overall  assessment  of 
CSR  1  does  not  include  an  assessment  of 
compliance  with  the  Stability  and  Growth 
pact): 

  Limited  progress  has  been  made 

in 
improving  the  cost-effectiveness  of  the 
healthcare  system:  as  a  comprehensive 
spending  review  has  identified  major  cost 
inefficiencies  and  potential  cost  savings, 
but  these  are  not  yet  backed  by  concrete 
measures. 

  Limited  progress  has  been  made 

in 
improving  tax  compliance.  While  some 
measures  have  been  launched  and  appear 
promising,  the  system  as  a  whole  remains 
too focused on control, with little attention 
paid to voluntary compliance.  

Slovakia  has  made 
addressing CSR 2: 

some  progress 

in 

  Some  progress  has  been  achieved  in 
improving  activation  measures.  An  action 
plan  on  the  integration  of  the  long-term 
unemployed  was  adopted  in  late  2016  in 
order to address the lack of individualised 
services  and  training.  However,  its  timely 
and  adequate  implementation  will  need  to 

(53)  The following categories are used to assess progress in implementing the 2016 country-specific recommendations: 

No progress: The Member State has not credibly announced nor adopted any measures to address the CSR. Below a number of 
non-exhaustive typical situations  that could be covered under this, to be interpreted on a case by case basis taking into account 
country-specific conditions: 

•  no  legal,  administrative,  or  budgetary  measures  have  been  announced  in  the  National  Reform  Programme  or  in  other  official 
communication  to  the  national  Parliament  /  relevant  parliamentary  committees,  the  European  Commission,  or  announced  in 
public (e.g. in a press statement, information on government's website);  
• no non-legislative acts have been presented by the governing or legislator body;   
•  the  Member  State  has  taken  initial  steps  in  addressing  the  CSR,  such  as  commissioning  a  study  or  setting  up  a  study  group  to 
analyse possible measures that would need to be taken (unless the CSR explicitly asks for orientations or exploratory actions), 
while clearly-specified measure(s) to address the CSR has not been proposed. 

Limited progress: The Member State has: 
• announced certain measures  but these only address the CSR to a limited extent;  and/or 
• presented legislative acts in the governing or legislator body but these have not been adopted yet and substantial non-legislative 

further work is needed before the CSR will be implemented;  

• presented non-legislative acts, yet with no further follow-up in terms of implementation which is needed to address the CSR. 
Some progress: The Member State has adopted measures that partly address the CSR  
and/or  
the Member State has adopted measures that address the CSR, but a fair amount of work is still needed to fully address the CSR as 
only  a  few  of  the  adopted  measures  have  been  implemented.  For  instance:  adopted  by  national  parliament;  by  ministerial 
decision; but no implementing decisions are in place. 

Substantial progress: The Member State has adopted measures that go a long way in addressing the CSR and most of which have 

been implemented. 

Full implementation: The Member State has implemented all measures needed to address the CSR appropriately. 

39 

 
 
 
 
 
 
 
 
 
                                                           
 
  Facilitate the employment of women, in particular 
by  extending  the  provision  of  affordable,  quality 
childcare.  

 

Improve  educational  outcomes  by  making  the 
teaching  profession  more  attractive  and  by 
increasing  the  participation  of  Roma  children 
from early childhood in mainstream education. 

A. Overview Table 

be  monitored.  No  targeted  efforts  have 
been  undertaken  to  help  integrate  Roma 
into the labour market.  

for 

  Some  progress  has  been  identified  in 
increasing  the  capacity  of  and  access  to 
early  childhood  education  and  care, 
the  over-threes.  For 
particularly 
children under three, the number of private 
facilities  has  increased  slightly  but  no 
progress  has  been  made  in  setting  up  a 
legislative 
childcare 
services. 

framework 

for 

of 

the 

attractiveness 

  Limited  progress  has  been  made  in  the 
educational  dimension  of  the  CSR.  Some 
measures have been taken in order to raise 
the 
teaching 
profession.  Substantial  annual  pay  rises 
have  been  agreed  or  are  planned  for  2016 
and  2017.  The  government  aims  to  raise 
entry 
teaching  and 
improve  training.    A  reform  to  support 
socially and ethnically inclusive education, 
including  of  Roma  pupils,  entered  into 
2016, 
force 
effectively 
implementing 
the  reform  will  require 
further efforts and political commitment.  

requirements 

but 

for 

in 

CSR 3:  

Slovakia  has  made 
addressing CSR 3: 

limited  progress 

in 

  Consolidate  governance,  reinforce  the  shift  from 
price  only  to  quality-based  competition  and 
improve  the  prosecution  of  illicit  practices  in 
public procurement.  

 

 

the 

Improve 
and 
transparency, 
effectiveness of human resources management in 
public administration,  in  particular by  adopting  a 
new civil service act, and the effectiveness of the 
justice system.  

quality 

  Limited  progress  has  been  made 

in 
improving  competition  and  fighting  illicit 
practices  in  public  procurement.  While 
some initiatives for fostering quality-based 
been 
procedures 
procurement 
launched,  these  are  not  yet  systematic  or 
concrete. 

have 

  Some  progress  has  been  made 

in 
improving human resource management in 
public administration. While the new Civil 
Service Act has the potential to materially 
improve  the  situation,  this  will  require 
determined  implementation  of  the  Act, 
which  will  be  applicable  only  from  the 
second half of 2017 onwards. 

  Limited progress has been made towards 
improving  the  effectiveness  of  the  justice 
system.  Although  the  new  government 

40 

 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

made this a key priority, the impact of new 
measures (some of which are still in draft) 
cannot be assessed yet. 

to 

  No progress has been made in adopting a 
comprehensive 
address 
plan 
administrative  and  regulatory  barriers  for 
businesses.  In  the  2016  national  reform 
programme 
government 
the  Slovak 
committed  to  adopt  a  corresponding  long-
term strategy, but the plan has not yet been 
formulated. 

After the sharp fall in employment during the 
financial  crisis  and  a  moderate  recovery  in 
2014,  the  Slovak  labour  market  improved 
slightly.  The  employment  rate  increased  and 
reaching 67.7 % in 2015 (Eurostat). However, 
despite these improvements, the labour market 
still performs worse than the EU average (for 
both  men  and  women)  and 
the  overall 
employment  rate  remains  significantly  below 
the target to be achieved by 2020. 

R&D intensity increased significantly between 
2007  and  2015  (from  0.46 %  to  1.18 %  of 
GDP; Eurostat). While this is just about meets 
the target, the extremely low level of business 
expenditure on R&D should be noted (0.33 % 
in 2015; Eurostat).  

2020 target: 13% 

According  to  the  latest  national  projections 
and taking into account the existing measures, 
the  non-ETS  emissions  are  expected 
to 
decrease by  3.8%  in  2020  compared  to  2005. 
Thus,  the  target  will  be  over-achieved  by 
some 16.8 percentage points.  

Non-ETS 2015 target: 5% 

While  the  target  for  2015  was  an  increase  of 
no  more  than  5%  compared  to  2005,  the 
preliminary  figures  show  that  the  non-ETS 
emissions actually decreased by 14%. 

  Adopt  a  comprehensive  plan 

regulatory  barriers 

to  address 
for 

administrative 
businesses. 

and 

Europe 2020 (national targets and progress)  

Employment:  

72 % 

R&D: 

1.2 % of GDP (where the private sector is to provide 
2/3 of total expenditure) 

National  Greenhouse  Gas  (GHG)  emissions  target: 
maximum  13%  increase  in  2020  compared  to  2005 
(in non-ETS sectors) 

41 

 
 
 
A. Overview Table 

Renewable energy target: 

14 % 

Slovakia  had  an  11.9 %  share  of  renewable 
energy in gross final consumption in 2015. (54) 
This  was  above 
indicative  goal  for 
the 
2015/2016  of  10 %,  which  the  country  needs 
in  order  to  stay  on  track  towards  its  2020 
target.  

Energy efficiency: 

16.4 Mtoe expressed in primary energy consumption 
(9.0 Mtoe expressed in final energy consumption) 

Early school leaving: 

6 % 

Tertiary education: 

40 % 

Slovakia has to increase its effort to lower its 
final  energy  consumption  further  in  order  to 
achieve 
energy 
indicative 
consumption 2020 target (9 Mtoe) and to keep 
its current primary energy consumption below 
its primary energy 2020 target (16.4 Mtoe). 

final 

its 

leavers 

The  percentage  of  early 
from 
education  and  training  increased  from  6.7 % 
in 2014 to 6.9% in 2015 (Eurostat) and is thus 
moving  away  further  away  from  the  6 % 
national  target.  It  is  particularly  high  for 
Roma, calling for targeted measures.  

in  2015 

(Eurostat).  While 

The  tertiary  education  attainment  rate  rose  to 
28.4 % 
this 
constitutes  progress,  efforts  to  ensure  greater 
quality and labour market relevance of higher 
education remain valid if the 40% target is to 
be reached. 

Poverty/social exclusion: 

Reduction  of  170 000  persons  between  2008  and 
2020 

there  was  a 
Between  2008  and  2015 
cumulative  decrease  of  148 000  (Eurostat). 
Given  that  the  figures  have  hardly  changed 
since  the  previous  year,  the  pace  of  poverty 
reaction appears to have stalled. 

(54)  Renewable energy shares for 2015 are approximations and not official data, reflecting the available data (04.10.2016). See the 
the  2016  Report  on  Renewable  Energy,  

in  Realisation  of 

Öko-Institut  Report:  Study  on  Technical  Assistance 
http://ec.europa.eu/energy/en/studies . 

42 

 
                                                           
 
ANNEX B 

MIP Scoreboard 

Table B.1: 

The MIP scoreboard for Slovakia 

Flags: b: break in time series. i: see metadata. na: not available.           
Note: 1) Unemployment rate: for 2011 i = Eurostat back-calculation to include 2011 Population Census results. 2) Youth 
unemployment rate: for 2011 i = Eurostat back-calculation to include 2011 Population Census results. 
Source: European Commission, Eurostat and Directorate General for Economic and Financial Affairs (for Real Effective 
Exchange Rate), and International Monetary Fund 

43 

Thresholds201020112012201320142015Current account balance, (% of GDP) 3 year average-4%/6%-4.9-4.4-2.9-0.71.31.1-35%-61.9-64.4-61.8-62.3-63.8-61.0Real effective exchange rate - 42 trading partners, HICP deflator3 years % change±5% & ±11% 10.93.4-3.12.11.2-0.7Export market share - % of world exports5 years % change-6%4.2-2.3-9.6-3.52.46.7Nominal unit labour cost index (2010=100)3 years % change9% & 12% 9.56.10.82.21.92.26%-5.0-5.2-5.9-0.41.55.514%2.93.03.15.15.78.2133%67.470.270.674.077.681.460%41.243.752.254.753.652.5Unemployment rate3 year average10%12.113.4i14.114.013.813.016.5%1.60.33.50.06.94.5-0.2%0.4-0.1b1.01.21.61.50.5%0.92.62.80.70.0-1.82%13.314.4i6.4-0.2-4.0-7.5Activity rate - % of total population aged 15-64 (3 years change in p.p)Long-term unemployment rate - % of active population aged 15-74 (3 years change in p.p)Youth unemployment rate - % of active population aged 15-24 (3 years change in p.p)External imbalances and competitivenessNew employment indicatorsNet international investment position (% of GDP)Deflated house prices (% y-o-y change)Total financial sector liabilities (% y-o-y change)Private sector credit flow as % of GDP, consolidatedPrivate sector debt as % of GDP, consolidatedGeneral government sector debt as % of GDPInternal imbalances 
 
 
 
 
 
ANNEX C 

Standard Tables 

Table C.1: 

Financial market indicators 

1) Latest data Q2 2016. 
2) Quarterly values are not annualised. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

44 

201120122013201420152016Total assets of the banking sector (% of GDP)82.282.182.384.687.889.8Share of assets of the five largest banks (% of total assets)72.270.770.370.772.3-Foreign ownership of banking system (% of total assets)94.995.896.096.096.3-Financial soundness indicators:1)              - non-performing loans (% of total loans)4.03.83.84.13.54.0              - capital adequacy ratio (%)13.515.917.517.317.717.3              - return on equity (%)2)12.09.010.09.29.76.7Bank loans to the private sector (year-on-year % change)9.33.86.47.410.49.1Lending for house purchase (year-on-year % change)13.711.111.913.613.814.1Loan to deposit ratio90.387.287.991.291.596.2Central Bank liquidity as % of liabilities3.14.00.71.11.21.3Private debt (% of GDP)70.270.674.077.681.4-Gross external debt (% of GDP)1) - public16.624.232.938.033.732.8    - private27.428.232.130.731.331.3Long-term interest rate spread versus Bund (basis points)*183.9305.8161.890.838.942.5Credit default swap spreads for sovereign securities (5-year)*135.2191.583.753.344.939.2 
 
 
 
 
 
C. Standard Tables 

Table C.2: 

Labour market and social indicators 

1) The unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within 2 weeks.       
2) Long-term unemployed are those who have been unemployed for at least 12 months.       
3) Not in education employment or training.       
4) Average of first three quarters of 2016. Data for total unemployment and youth unemployment rates are seasonally 
adjusted. 
Source: European Commission (EU Labour Force Survey). 

45 

201120122013201420152016 4Employment rate(% of population aged 20-64)65.065.165.065.967.769.7Employment growth (% change from previous year)1.80.1-0.81.42.02.3Employment rate of women(% of female population aged 20-64)57.457.357.858.660.362.5Employment rate of men (% of male population aged 20-64)72.572.872.273.275.076.8Employment rate of older workers (% of population aged 55-64)41.343.144.044.847.048.6Part-time employment (% of total employment, aged 15-64)4.04.04.55.15.85.7Fixed-term employment (% of employees with a fixed term contract, aged 15-64)6.56.76.88.810.510.0Transitions from temporary to permanent employment40.742.041.035.330.8:Unemployment rate1 (% active population, age group 15-74)13.714.014.213.211.59.9Long-term unemployment rate2 (% of labour force)9.39.410.09.37.65.9Youth unemployment rate (% active population aged 15-24)33.734.033.729.726.522.8Youth NEET3 rate (% of population aged 15-24)13.813.813.712.813.7:Early leavers from education and training (% of pop. aged 18-24 with at most lower sec. educ. and not in further education or training)5.15.36.46.76.9:Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)23.223.726.926.928.4:Formal childcare (30 hours or over; % of population aged less than 3 years)3.04.03.06.0:: 
 
 
 
 
C. Standard Tables 

Table C.3: 

Labour market and social indicators (continued) 

1) People at risk of poverty or social exclusion: individuals who are at risk of poverty and/or suffering from severe material 
deprivation and/or living in households with zero or very low work intensity.       
2) At-risk-of-poverty rate : proportion of people with an equivalised disposable income below 60 % of the national equivalised 
median income.        
3) Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone.       
4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months.       
5) For EE, CY, MT, SI and SK, thresholds in nominal values in euros; harmonised index of consumer prices = 100 in 2006 (2007 
survey refers to 2006 incomes). 
Source: For expenditure for social protection benefits ESSPROS; for social inclusion EU-SILC. 

46 

Expenditure on social protection benefits (% of GDP)201020112012201320142015Sickness/healthcare5.45.35.35.55.6:Disability1.51.51.61.61.6:Old age and survivors7.67.57.77.98.2:Family/children1.71.71.71.71.7:Unemployment1.00.80.70.60.5:Housing0.00.00.00.00.0:Social exclusion n.e.c.0.50.40.40.40.4:Total17.717.317.517.818.0:of which: means-tested benefits0.90.90.90.90.9:Social inclusion indicators201020112012201320142015People at risk of poverty or social exclusion1 (% of total population)20.620.620.519.818.418.4Children at risk of poverty or social exclusion  (% of people aged 0-17)25.326.026.625.523.624.9At-risk-of-poverty  rate2 (% of total population)12.013.013.212.812.612.3Severe material deprivation rate3  (% of total population)11.410.610.510.29.99.0Proportion of people living in low work intensity households4 (% of people aged 0-59)7.97.77.27.67.17.1In-work at-risk-of-poverty rate (% of persons employed)5.76.36.25.75.76.0Impact of social transfers (excluding pensions) on reducing poverty39.433.334.036.335.735.3Poverty thresholds, expressed in national currency at constant prices5343435163710347834653530Gross disposable income (households; growth %)1.51.92.81.42.53.9Inequality of income distribution (S80/S20 income quintile share ratio)3.83.83.73.63.93.5GINI coefficient before taxes and transfers43.943.641.941.343.2:GINI coefficient after taxes and transfers25.925.725.324.226.1: 
 
 
 
 
C. Standard Tables 

Table C.4: 

Product market performance and policy indicators 

1) The methodologies, including the assumptions, for this indicator are shown in detail at : 
http://www.doingbusiness.org/methodology.        
2) Average of the answer to question Q7B_a. '[Bank loan]: If you applied and tried to negotiate for this type of financing over 
the past six months, what was the outcome?'. Answers were scored as follows: zero if received everything, one if received 
most of it, two if only received a limited part of it, three if refused or rejected and treated as missing values if the application is 
still pending or if the outcome is not known.       
3) Percentage population aged 15-64 having completed tertiary education.       
4) Percentage population aged 20-24 having attained at least upper secondary education.       
5) Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail at:  http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm       
6) Aggregate OECD indicators of regulation in energy, transport and communications. 
Source: European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation indicators); SAFE (for outcome of SMEs' applications for bank loans). 

47 

Performance indicators201020112012201320142015Labour productivity (real, per person employed, year-on-year % change)Labour productivity in industry17.861.201.420.6511.306.84Labour productivity in construction-4.9310.409.84-7.81-0.062.70Labour productivity in market services2.27-1.201.411.131.771.02Unit labour costs (ULC) (whole economy, year-on-year % change)ULC in industry-14.763.264.513.41-7.65-3.55ULC in construction9.36-6.64-8.0810.80-0.461.96ULC in market services1.095.94-0.071.261.633.45Business environment201020112012201320142015Time needed to enforce contracts1 (days)565.0565.0545.0545.0705.0705.0Time needed to start a business1 (days)17.517.513.518.511.511.5Outcome of applications by SMEs for bank loans2na0.92na1.070.830.65Research and innovation201020112012201320142015R&D intensity0.620.660.800.820.881.18Total public expenditure on education as % of GDP, for all levels of education combined4.224.063.054.12nanaNumber of science & technology people employed as % of total employment393837373737Population having completed tertiary education3151617181819Young people with upper secondary education4939393919191Trade balance of high technology products as % of GDP-3.17-4.93-5.55-5.32-5.08-5.94Product and service markets and competition200320082013OECD product market regulation (PMR)5, overallna1.621.29OECD PMR5, retail1.141.041.75OECD PMR5, professional servicesnana2.90OECD PMR5, network industries63.332.281.88 
 
 
 
 
 
 
C. Standard Tables 

Table C.5:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2005 prices). 
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR). 
          Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR). 
          Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR). 
          Waste intensity: waste (in kg) divided by GDP (in EUR) 
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP. 
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP. 
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change). 
Real unit energy cost: real energy costs as a percentage of total value added for the economy. 
Environmental taxes over labour taxes and GDP: from European Commission's database, ‘Taxation trends in the European 
Union’. 
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2005 
EUR). 
Real unit energy costs for manufacturing industry excluding refining : real costs as a percentage of value added for  
manufacturing sectors. 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP. 
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000–100 000 GJ; figures 
excl. VAT. 
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste. 
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP 
Proportion of GHG emissions covered by EU Emissions Trading System (ETS) (excluding aviation): based on greenhouse gas 
emissions (excl land use, land use change and forestry) as reported by Member States to the European Environment Agency. 
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transport industry gross value 
added (in 2005 EUR). 
Transport carbon intensity: GHG emissions in transport activity divided by gross value added of the transport sector 
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels. 
Aggregated supplier concentration index:  covers oil, gas and coal. Smaller values indicate larger diversification and hence 
lower risk. 
Diversification of the energy mix: Herfindahl index over natural gas, total petrol products, nuclear heat, renewable energies 
and solid fuels. 
Source: European Commission (Eurostat) unless indicated otherwise 

48 

Green growth performance201020112012201320142015MacroeconomicEnergy intensity kgoe / €0.260.250.240.240.220.22Carbon intensity kg / €0.940.900.830.810.75-Resource intensity (reciprocal of resource productivity)kg / €1.451.461.241.171.261.30Waste intensity kg / €0.19-0.16-0.16-Energy balance of trade % GDP-5.7-6.4-5.9-5.9-4.3-Weighting of energy in HICP%15.6815.4018.9116.4816.1815.54Difference between energy price change and inflation %-4.04.71.8-1.9-2.0-2.0Real unit of energy cost% of value added27.630.930.228.925.5-Ratio of environmental taxes to labour taxesratio0.130.120.110.110.11-Environmental taxes% GDP1.81.81.71.71.8-Sectoral Industry energy intensity kgoe / € 0.310.290.300.300.270.25Real unit energy cost for manufacturing industry excl. refining% of value added24.026.225.423.622.8-Share of energy-intensive industries in the economy% GDP15.0715.0515.4214.4616.5020.28Electricity prices for medium-sized industrial users€ / kWh0.120.130.130.130.120.11Gas prices for medium-sized industrial users€ / kWh0.030.040.040.040.040.03Public R&D for energy % GDP0.010.010.000.000.010.01Public R&D for environmental protection% GDP0.010.010.010.010.010.01Municipal waste recycling rate%9.110.313.310.810.314.9Share of GHG emissions covered by ETS*%50.151.150.750.951.551.2Transport energy intensitykgoe / €1.130.980.850.870.650.57Transport carbon intensitykg / €3.172.692.502.501.93-Security of energy supplyEnergy import dependency%63.164.360.259.260.958.7Aggregated supplier concentration indexHHI71.071.966.168.970.4-Diversification of energy mixHHI0.220.220.220.220.21- 
 
 
 
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