COMMISSION STAFF WORKING DOCUMENT Country Report Slovakia 2019 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 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
Date: 2019-02-27
Institutions: European Commission, Secretariat-General
Subjects: Slovakia, economic situation, education, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 27.2.2019  SWD(2019) 1024 final  COMMISSION STAFF WORKING DOCUMENT Country Report Slovakia 2019 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP  2019 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(2019) 150 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.  Financial sector 

3.3.  Labour market, education and social policies 

3.4.   Competitiveness and investment 

Annex A: OVERVIEW TABLE 

Annex B: Commission Debt Sustainability Analysis and fiscal risks 

Annex C: Standard Tables 

Annex D: Investment Guidance on Cohesion Policy Funding 2021-2027 for 

SLOVAKIA 

References 

LIST OF TABLES 

Table 1.1: 

Key economic and financial indicators — Slovakia 

Table 2.1: 

Summary table on 2018 CSR assessment 

Table C.1: 

Financial market indicators 

Table C.2: 

Headline Social Scoreboard indicators 

Table C.3: 

Labour market and education indicators 

Table C.4: 

Social inclusion and health indicators 

Table C.5: 

Product market performance and policy indicators 

Table C.6: 

Green growth 

LIST OF GRAPHS 

Graph 1.1: 

Real GDP growth and its components 

Graph 1.2:  GNI per person in purchasing power standards 

Graph 1.3:  Gross fixed capital formation 

1 

3 

6 

14 

18 

18 

23 

26 

36 

49 

54 

55 

61 

67 

13 

16 

55 

56 

57 

58 

59 

60 

6 

6 

7 

 
 
 
 
Graph 1.4: 

Current and capital account balance 

Graph 1.5: 

Activity, employment and unemployment rates 

Graph 1.6: 

Labour shortage index 

Graph 1.7: 

Regional disparities 

Graph 1.8: 

Consumer inflation (y-o-y, %) 

Graph 1.9: 

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

Graph 1.10:  House prices 

Graph 2.1:  Overall multiannual implementation of 2011-2018 country-specific recommendations 

(CSR) to date 

Graph 3.1.1:  Value-added tax compliance gap (2012-2016) 

Graph 3.1.2:  Liabilities of health sector units included in general government (2012-2017) 

Graph 3.1.3:  Medical personnel by NUTS 2 

Graph 3.2.1:  SK Banks return on equity 

Graph 3.2.2:  NPL and performing forborne loans 

Graph 3.2.3:  House price to income ratio 

Graph 3.2.4:  Valuation Gap 

Graph 3.2.5:  Debt / GDP, Households 

Graph 3.3.1:  Unemployment rate by regions December 2018 

Graph 3.3.2:  Link between unemployment rate (% x axis, Q1-2017) and share of Roma population 

(%, y axis) 

Graph 3.3.3:  Employment rates by age group and sex, 2017 

Graph 3.3.4:  Regions of poverty 

Graph 3.3.5:  Early Leavers (age 18-24) from education and training by NUTS 2 regions 

Graph 3.4.1:  Evolution of labour productivity and gaps (GVA per worker in PPS) 

Graph 3.4.2:  Business expenditures on R&D in % of GDP 

Graph 3.4.3:  Digital Connectivity Index () 

Graph 3.4.4:  Public procurement 

LIST OF BOXES 

Box 2.1: EU funding helps to connect regions and to foster development in Slovakia 

Box 3.3.1: Monitoring performance in light of the European Pillar of Social Rights 

Box 3.4.1: Investment challenges and reforms in Slovakia 

8 

8 

9 

10 

10 

11 

11 

14 

19 

21 

22 

23 

23 

24 

24 

25 

26 

28 

29 

31 

34 

36 

38 

40 

46 

17 

27 

48 

2 

 
 
 
 
 
EXECUTIVE SUMMARY 

Slovakia's  impressive  economic  development 
since EU accession has laid the foundations for 
stronger  future  growth.  (1)  Efforts  to  strengthen 
the  public  finances  have  helped  to  create  stability 
and  have  paved  the  way  for  policies  to  help 
Slovakia  modernise  and 
innovate.  However, 
persistent  weaknesses  in  certain  aspects  of  the 
labour  market,  in  education,  infrastructure,  public 
administration and corruption still limit productive 
potential.  A  combination  of  well-designed  reform 
policies  and  strategic  investment  could  alleviate 
these barriers to growth, shield  the economy from 
the  Slovak 
a  potential  slowdown  and  allow 
economy to move up the value chain. 

Economic growth has accelerated further due to 
a synergy of supporting factors. According to the 
latest  Commission  forecast,  real  Gross  Domestic 
Product  (GDP)  is  projected  to  have  increased  by 
4.2 %  in  2018  due  to  solid  growth  in  household 
spending  amidst  a  strong  labour  market  recovery 
and  large  average  pay  increases.  Investment, 
especially  in  the  private  sector  has  been  picking 
up.  Real  GDP  growth  is  expected  to  remain 
buoyant at 4.1 % in 2019 before easing slightly to 
3.5 %  in  2020.  A  combination  of  strong  domestic 
demand  and  increasingly  strong  growth  in  net 
exports  underpins  this  favourable  outlook.  While 
private  sector  investment  growth  is  likely  to 
normalise  in  the  medium  term,  external  demand 
will  act  as  an  important  source  of  economic 
growth,  partly  owing  to  expanding  production 
facilities in the export-heavy manufacturing sector. 
The  government  deficit  is  projected  to  move 
further towards a balanced budget position in 2019 
and  the  ratio  of  government  debt  to  GDP  ratio  is 
projected to decline to under 47 % of GDP. 

The  labour  market  situation  improved  due  to 
strong  economic  growth.  The  employment  rate 
(of people aged 20-64) rose to 72.5 % in the third 
quarter of 2018 and the unemployment rate fell to 
an  all-time  low  of  6.1  %  in  the  fourth  quarter 
(seasonally adjusted). It is unlikely that the recent 
pace  of  job  creation  can  be  sustained  in  view  of 

Survey 

published 

(1)  This  report  assesses  Slovakia’s  economy  in  light  of  the  European 
Commission’s  Annual  Growth 
on 
21 November 2018.  In  the  survey,  the  Commission  calls  on  EU 
Member  States  to  implement  reforms  to  make  the  European 
economy  more  productive,  resilient  and  inclusive.  In  so  doing, 
Member  States  should  focus  their  efforts  on  the  three  elements  of 
the virtuous triangle of economic policy  — delivering high-quality 
investment,  focusing  reforms  efforts  on  productivity  growth, 
inclusiveness and institutional quality and ensuring macroeconomic 
stability and sound public finance. 

remain 

widespread  labour  shortages,  an  already  high 
activity  rate  and  high  long-term  unemployment 
reflecting  mismatches  between  companies’  needs 
and the available  workforce. Job opportunities for 
disadvantaged  groups 
scarce,  while 
relatively  few  workers  move  within  Slovakia  for 
better  work  opportunities  and 
large  regional 
disparities  continue  to  make  it  difficult  for  the 
economically  weaker  regions  in  eastern  Slovakia 
to  catch  up.    Poor  educational  outcomes  and 
inequality based on socioeconomic background are 
obstacles to inclusive growth.  

Economic  convergence  may  potentially  resume 
and  could  help  reduce  existing  inequalities.  As 
economic growth is expected to remain well above 
the  EU  average,  Slovakia's  income  per  capita  is 
likely  to  begin  to  catch  up  again  with  the  EU 
average.  The 
the 
manufacturing sector is concentrated in the west of 
the  country  and  its  benefits  will  not  necessarily 
spill over to  weaker regions. Improvements in the 
quality  of  public 
targeted 
investment may help reduce long-standing regional 
and socioeconomic inequalities.  

institutions  and 

expansion 

current 

in 

Growth in house prices appears to have peaked, 
as  macroprudential  policy  measures  help  to 
contain  credit  growth.  Low  interest  rates  and 
limited  housing  supply  still  support  house  prices, 
but  a  range  of  indicators  suggest  no  signs  of 
overvaluation. 
significant 
to  continue, 
Budgetary  consolidation 
supported by a favourable economic environment.  

housing  market 

is  set 

Addressing  the  various  investment  needs  in 
in  education, 
including  those 
Slovakia  — 
energy 
and 
infrastructure 
innovation, 
technology  —  will  help  secure  future  growth 
and prosperity. Strategic investments in education 
and training and in research  and development can 
help  to  bring  out  the  best  in  young  and  future 
workers  and  researchers.  Making  the  economy 
more knowledge-based will require investments in 
digital  connectivity  and  the  digital  transformation 
of  enterprises.  Inadequate  road  and  rail  transport 
networks hinder smooth and efficient transport and 
transit.  Sustainable  and  green  investment  can 
improve  the  energy  efficiency  of  industries  and 
buildings  and  support  climate  change  adaptation, 
waste  and  water  management,  biodiversity  and 
improved  air  quality.  Shortages  of  skilled  labour 
and future economic and social trends will require 

3 

 
 
                                                           
Executive summary 

sustained  effort  would  be  needed  to  attain  the 
R&D  target.  Meeting  the  target  for  early  school 
leaving  will  be  challenging  as  the  situation  has 
continuously deteriorated over the past years. 

Slovakia  faces  challenges  with  regard  to  a 
number  of  indicators  of  the  Social  Scoreboard 
supporting the European Pillar of Social Rights. 
While  both  employment  and  unemployment  rates 
are  improving  at  a  fast  pace,  the  long-term 
unemployment  rate  remains  high  despite  recent 
decreases. Early school leaving  is becoming  more 
prevalent,  enrolment  rates  of  young  children  in 
childcare  remain  very  low  and  availability  of 
childcare facilities continues to be underdeveloped. 
On  the  positive  side,  income  and  employment 
inequalities  remain  low  and  so  do  the  poverty 
levels,  even  though  the  impact  of  social  transfers 
on  reducing  poverty  has  deteriorated.  Access  to 
public services, including healthcare, is difficult in 
particular  in  some  regions.  Key  structural  issues 
analysed  in  this  report,  which  highlight  particular 
challenges 
the 
following:  

for  Slovakia's  economy,  are 

the  effectiveness  of 

  Buoyant  revenues  are  helping  to  lower  the 
budget  deficit  while  efforts  to  boost  tax 
compliance continue. While progress has been 
made in reducing non-payment of value-added 
tax, 
tax  compliance 
measures in reducing the high value-added tax 
gap 
to  be  seen.  Property  and 
environmental taxation remain a weak revenue 
source,  but  thematic  public  spending  reviews 
are  increasingly  shaping  public  services  and 
resource allocation for the better.  

remains 

of 

  Healthcare  and  pension  systems  are  the 
source 
sustainability 
long-term 
challenges.  Slovakia’s  projected  rise  in  age-
related  costs  is  attributable  to  pension  and 
healthcare  spending  in  broadly  equal  amounts. 
The implementation of reforms to improve the 
cost-effectiveness  of 
system 
continues, but public hospitals are still making 
large losses and were again granted debt relief 
in  2018.  Staffing  shortages  in  the  healthcare 
sector 
challenge, 
particularly in rural areas. The main features of 
the  eHealth  system,  launched  in  2017,  are 
implementation  of 
the 
operational, 
for  monitoring 
groups 
diagnosis-related 

the  health 

represent 

growing 

and 

a 

investment  in  improving  people’s  skills  and  in 
social infrastructure. This includes more accessible 
social  housing,  better  healthcare,  long-term  care 
and  childcare,  with  appropriate  attention  being 
paid to regional disparities. Annex D identifies key 
priorities  for  support  by  the  European  Regional 
Development Fund, the European Social Fund Plus 
and  the  Cohesion  Fund  over  2021-2027,  building 
on the analysis of investment needs and challenges 
outlined in this report.  

Slovakia has made some progress in addressing 
the 2018 country-specific recommendations.  

There has been some progress in: 

 

the  cost-effectiveness  of 

the 
Increasing 
healthcare  sector  and  addressing  staffing 
shortages; 

  Reinforcing activation and upskilling measures, 
in  particular  by  delivering  on  the  Action  Plan 
for the Long-Term Unemployed; 

  Fostering 

employment 

opportunities 

for 

women by extending childcare capacities; and 

 

Increasing 
the  use  of  quality-related  and 
lifecycle  cost  criteria  in  public  procurement 
operations. 

There has been limited progress in: 

 

Improving  the  quality  and  inclusiveness  of 
education; 

  Tackling corruption; 

 

Improving  the  effectiveness  of  the  justice 
system; and 

  Reducing  the  fragmentation  of  the  public 
research  system  and  stimulating  business 
innovation. 

Regarding  progress  towards  its  national  targets 
under the Europe 2020 strategy, Slovakia currently 
meets,  or  is  on  track  towards  meeting,  the  targets 
in relation to the employment rate, greenhouse gas 
emissions,  energy  efficiency  and  reducing  the 
number  of  people  at  risk  of  poverty  and  social 
exclusion.  The  target  for  renewable  energy  use  is 
currently  not  met  but  could  potentially  be  met 
through  dedicated  policy  efforts.  The  distance  to 
tertiary 
the 
education  remains  significant,  and  although  it  is 
progressively  narrowing  in  the  latter  case,  a 

intensity  and 

for  R&D 

targets 

4 

 
 
Executive summary 

well-qualified  prospective  staff.  Inclusion  of 
Roma  in  education  remains  problematic.  New 
taken 
measures  have  been 
to  encourage 
in  early  childhood 
children’s  participation 
education and care, but a shortage of childcare 
facilities  continues  to  hinder  female  labour 
market  participation.  Reforms  aimed  at 
improving  higher  education  quality  could 
provide  a  boost  to  Slovakia's  human  capital. 
Vocational  education  and  training  reforms  are 
helping  to  align  the  supply  and  demand  for 
skills.  

  Productivity 

but 

reforms, 

gains  have  driven  past 
convergence  and  can  enhance  Slovakia's 
future  economic  potential.  Cohesion  policy 
remains  an  important  driver  of  productivity-
enhancing 
insufficient 
administrative  capacity  to  manage  funding 
limits  its  transformative  potential.  Promoting 
research  and  innovation  is  a  prime  avenue  for 
unlocking  productivity  gains  but  this  is  still 
hampered  by  a  fragmented  public  research 
system.  Boosting  private  and  public  R&D 
investment,  consolidating  the  public  research 
system to make it attractive for top researchers, 
and 
specialisation  and 
digitalisation 
are  key  policy  priorities. 
Promoting  the  circular  economy  and  resource 
efficiency, 
protecting 
environmental  assets  such  as  clean  air,  water 
and  forests,  is  critical  in  order  to  make 
Slovakia's productivity growth sustainable. 

supporting 

including 

smart 

by 

  The  public  administration  and  the  wider 
business  environment  remain  weak.  Despite 
the  efforts  carried  out  within 
the  Better 
Regulation  Strategy  (RIA2020),  insufficient 
cooperation  between  administrative  levels  and 
frequent legislative, regulatory and tax changes 
make  government  less  effective.  Efforts  have 
been made to improve quality and competition 
in public procurement. Corruption continues to 
pose  a  challenge,  and  organisational  and 
the  police  and 
procedural  weaknesses  at 
as  weak 
level, 
prosecutor’s 
whistleblower  protection,  hinder 
the  fight 
against corruption. Improving the effectiveness 
of  the  justice  system  remains  a  challenge. 
the  overall  efficiency  has  been 
While 
improving,  concerns  over 
the  perceived 
independence of the judiciary persist. 

as  well 

purposes 
is  gradually  progressing.  Public 
health  promotion  and  disease  prevention 
continue  to  offer  chances  to  increase  healthy 
life years and reduce healthcare costs. 

  Slovakia's  financial  sector 

is  financially 
sound  but  rising  private  indebtedness  poses 
vulnerabilities.  Regulatory  measures  to  tame 
debt  accumulation  by  households  have  helped 
to  slow  loan  growth,  but  demand  and  supply 
conditions  for  mortgage  credit  make  further 
debt  growth 
term. 
in 
likely 
rise 
Although  house  prices  continue 
appreciably and affordability is stretched, there 
are no signs of a significant overvaluation yet. 

the  medium 
to 

  The  labour  market  is  tightening  further, 
exposing  a  number  of  structural  challenges. 
Demographic  trends  and  changing  production 
methods  will  require  workers  to  adapt  by 
investing  in  skills.  The  number  of  unfilled 
is  rising  and  requires  effective 
vacancies 
implementation  of  active 
labour  market 
policies  and  raising  intra-country  mobility. 
Long-term  unemployment  remains  stubbornly 
high  even  though  it  is  declining  due  to  the 
implementation  of  the  Action  Plan  for  the 
Integration  of  the  Long-Term  Unemployed, 
adopted  in  November  2016.  The  low  labour 
market  participation  of  the  Roma  remains  of 
concern. 

  A  stronger 

in 

the  south-eastern  parts  of 

is  reducing 
labour  market 
poverty  levels  but  some  regions  lag  behind 
is  particularly 
significantly.  The  situation 
critical 
the 
country,  where  high  poverty  and  social 
exclusion  levels  are  acute  in  the  marginalised 
Roma  communities.  The  effectiveness  of 
policies  to  improve  the  social  inclusion  of 
disadvantaged 
by 
inefficient 
insufficient 
governance 
low 
the 
attractiveness of social work.  

is 
housing, 
and 

social 
structures 

hampered 

groups 

  Education  and  training  are  being  reformed 
but  their 
inclusiveness 
low  quality  and 
represents a weakness. Spending on education 
has been falling in recent years relative to GDP 
and  educational  outcomes  have  worsened. 
Despite pay rises for teachers, salary levels are 
still not sufficiently attractive to attract enough 

5 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

Growth performance 

Slovakia is enjoying very good economic times. 
After  expanding  by  3.2 %  in  2017,  economic 
growth  (real  GDP)  is  projected  to  have  picked  up 
to  4.2 %  in  2018  (Graph  1.1).  Continued  and 
substantial  improvements  in  the  labour  market 
have  led  to  higher  private  consumption  which 
supported  the  economic  expansion.  While  public 
investment  activity  has  followed  a  somewhat 
uneven pattern since 2015, reflecting the transition 
between  the  programming  periods  for  EU  funds, 
private  investment  has  also  played  a  significant 
role  in  accelerating  GDP  growth,  especially  in 
2018. 

Graph 1.1: 

Real GDP growth and its components 

economic growth in the medium term, as are rising 
labour shortages. 

In  spite  of  the  swift  economic  expansion, 
convergence  has  yet  to  re-ignite.  Real  GDP  per 
person  based  on  purchasing  power  standards  has 
stood at round 77 % of the EU average since 2014, 
income  per  person  also 
and  gross  national 
remained broadly stable since 2013 at around 76 % 
of the EU average (Graph 1.2)(2). By contrast, real 
GDP  per  person  growth  between  2014  and  2017 
outpaced  EU  average  growth  by  more  than  5  pps 
cumulatively,  relative  price  level  developments 
offset  these  gains.  These  divergent  trends  are 
explained  by  different  data  trajectories  in  the 
underlying  price  adjustment.  However,  Slovakia’s 
relatively  fast  economic  growth  trend,  combined 
with less divergent price level developments, may 
revive  nominal  convergence  of  Slovakia  over  the 
medium term. 

Graph 1.2:  GNI per person in purchasing power standards 

Source: European Commission 

The economic expansion is likely to ease slightly 
in  2019  when  exports  are  forecast  to  boost  the 
economy.  Economic  growth  is  expected  to  reach 
4.1 % in 2019 and to ease to 3.5 % in 2020. Private 
consumption  is  set  to  remain  the  key  driver  of 
economic  expansion  for  the  coming  years.  A 
newly  built  car  factory  will  increase  exports 
significantly in 2019, despite an expected slowing 
in foreign demand. Investment activity is likely to 
ease after the strong performance in 2018. Growth 
in households’ real disposable income is expected 
to  slow  down  in  the  medium  term  due  to  higher 
inflation and slower employment growth. This will 
be  an  important  factor  slowing  the  economic 
expansion beyond 2020. The expected deceleration 
in  foreign demand is another  factor likely to limit 

6 

Source: European Commission 

Potential growth 

The  economic  expansion  features  both  cyclical 
and 
recent 
structural  components.  While 
investment activity has stimulated potential growth 
in  parallel  with  actual  GDP,  the  predominantly 

(2)  In economies such as Slovakia, which have high stocks of 
foreign  investment  and  significant  dividend  outflows, 
Gross  National  Income  is  arguably  a  more  appropriate 
measure of domestic income available for consumption and 
investment. 

-10,00-5,000,005,0010,0015,00200320042005200620072008200920102011201220132014201520162017201820192020InventoriesInvestment (GFCF)ConsumptionNet exportsReal GDP growth4045505560657075808590200020012002200320042005200620072008200920102011201220132014201520162017Czech RepublicHungaryPolandSlovakia 
 
 
 
 
                                                           
1. Economic situation and outlook 

consumption-led  economic  expansion  in  2018  has 
driven GDP growth  to rates above  potential.  As a 
result, overall economic growth is accompanied by 
a  widening  positive  output  gap  reflecting  the 
progressive  tightening  in  the  labour  market  and 
historically low cost of credit. 

2019,  making  it  a  less  important  contributor  to 
growth. Public investment is expected to assume a 
more  prominent  role  thanks  to  some  major  public 
investment  projects.  Given  the  past  experience 
with EU investment funds, the approaching end of 
the  programming  period  of  EU  funding  is  also 
likely to spur public investment. 

Potential  growth  is  projected  to  sustain  a  solid 
pace  exceeding  3 %  over  the  next  few  years. 
However, 
the  demographic  outlook,  with  a 
projected decline in the working-age population(3), 
indicates  that  labour  is  likely  to  drag  on  potential 
growth  in  the  years  to  come.  Moreover,  despite 
Slovakia  having  higher  gross 
fixed  capital 
formation  as  a  share  of  GDP  than  the  EU, 
economic convergence  has  stalled in recent  years. 
Deepening  the  capital  stock  and  investing  in 
intangible 
value-added 
and 
technologies  can  help  diversify  the  economy  and 
sustain economic growth and convergence. 

capital 

high 

Household consumption 

Significant  gains  in  the  labour  market  have 
boosted private consumption. Solid growth in the 
real disposable income of households, a favourable 
macroeconomic  climate  together  with  low  credit 
costs  have  set  favourable  conditions  for  private 
spending.  Private  consumption  is  expected  to 
remain  the  main  driver  of  growth  in  the  coming 
years.  The  progressive  tightening  of  the  labour 
market  and  the  resulting  rapid  wage  growth  is 
expected  to  feed  into  consumer  price  inflation  in 
the  coming  years.  Nevertheless,  growth  of 
household  consumption  in  real  terms  is  projected 
to remain around 3 %, which leaves the household 
saving rate broadly stable at close to 7.5 %. 

Investment 

Total  investment  has  only  recently  reached  the 
level.  After  a  period  of  muted 
pre-crisis 
investment  activity,  EU  funds  drawdown  and 
stronger  private  investment  activity  helped  to 
reverse  the  declining  trend  in  potential  growth.  A 
surge  in  investment  activity  in  2018  directed 
mainly  at  the  construction  of  a  new  car  factory 
significantly  contributed 
to  overall  economic 
growth 
(Graph  1.3).  The  high  growth  of 
investment  in  2018  is  unlikely  to  be  matched  in 

(3)  The working-age population is expected to shrink by 4.7 % 

by 2025. 

Slovakia’s  large  stock  of  inward  foreign  direct 
investment  dominates  the  country’s  negative 
net  international  investment  position.  Although 
foreign  direct  investment  outflows  have  gained 
importance since early 2016, its net (inward) stock 
as a share in GDP returned to above 50 % in 2017. 
However,  overall 
foreign  direct 
investment are spread unevenly across the country, 
not  least  because  foreign  firms  typically  locate 
their  headquarters  in  major  cities.  Some  regions 
have  not  attracted  major  domestic  or  foreign 
investment 
the 
already  high  regional  disparities  present  in  many 
economic and social areas. 

in  recent  years,  exacerbating 

flows  of 

Graph 1.3:  Gross fixed capital formation 

Source: European Commission 

Export performance and competitiveness 

Foreign  trade  is  likely  to  accelerate  Slovakia’s 
economic  growth  in  2019.  After  a  rather  muted 
contribution  to  economic  expansion  in  2018,  the 
positive  effect  of  new  investment  on  Slovakia’s 
export  capacities  and 
is 
expected  to  be  built  over  2019-2020.  This  should 
result  in  substantial  export  market  share  gains. 
Imports are expected to lag behind exports as high 

trade  performance 

7 

50607080901001101201301401502008Q12008Q32009Q12009Q32010Q12010Q32011Q12011Q32012Q12012Q32013Q12013Q32014Q12014Q32015Q12015Q32016Q12016Q32017Q12017Q32018Q12018Q3totalequipmentnon-residential construction 
                                                           
 
 
1. Economic situation and outlook 

import-intensive  investment  is  projected  to  slow. 
This should further support the net trade effect on 
economic growth.  

labour  market 

A  solid  foreign  trade  performance  has  been 
accompanied  by 
slight  erosion  of  price 
competitiveness  of  Slovak  exports.  The  unit 
labour  cost-based  real  effective  exchange  rate 
weakened  mainly  due  to  rising  labour  costs.  As  a 
result  of 
tightening,  average 
nominal wages increased by 6.1 % from EUR 935 
in Q3-2017 to EUR 992 in Q3-2018. Labour costs 
are set to grow further in the next years, outpacing 
the expected productivity gains. Strong investment 
into  manufacturing  —  the  economy’s  dominant 
export  sector  —  between  2014  and  2017  has 
strengthened  labour  productivity  in  the  sector 
cumulatively  by  almost  12 %,  thus  mitigating 
negative  costs  developments.  The  expected 
slowdown  in  investment  activity  is  likely  to  slow 
productivity  gains,  thus  leading  to  faster  rise  in 
unit labour cost. 

Graph 1.4:  Current and capital account balance 

Foreign direct investment, which represents a safer 
and  more  stable  form  investment  instruments, 
forms  the  bulk  of  the  liabilities.  However,  the 
share of riskier instruments, such as short-term and 
long-term  debt,  has  increased  significantly  since 
2009 and stood at -15.1 % of GDP in 2017. 

Labour market and social situation 

in 

Labour  market  conditions  are  improving  amid 
strong employment growth. Total employment is 
above 2.5 million and the employment rate (20-64) 
increased  to  72.5 %  in  Q3-2018  (+1.4  pps  yearly, 
seasonally adjusted), with a particularly strong job 
creation 
sector.  The 
the  manufacturing 
unemployment  rate  has  declined  continuously 
since 2013 and in Q4-2018 reached an all-time low 
of  6.1 %.  The  activity  rate  (15-64)  inched  up  to 
72.4 %  in  Q3-2018  while  labour  shortages  are  on 
the  rise.  Labour  market  slack  shrank  by  Q3-2018 
(year-on-year)  due  to  the  strong  fall  in  both  the 
underemployed  (from  59 000  to  49 000)  and  the 
number of discouraged workers (4) (from 46 000 to 
40 000). 

Graph 1.5:  Activity, employment and unemployment 

rates 

Source: European Commission 

The  current  account  balance  is  expected  to 
remain in a deficit. Acceleration in exports due to 
new  production  facilities  in  2019  is  expected  to 
mitigate  the  negative  contribution  of  the  income 
balance  to  the  current  account  (Graph  1.4).  The 
income  balance  is  expected  to  remain  negative 
over 2019-2020 on the back of dividend outflows. 
Mostly negative past net financing flows have built 
up  a  considerable  negative  net 
international 
investment  position  (-65.6 %  of  GDP  in  2017). 

Source: European Commission 

The  tightening  of  the  labour  market  increases 
labour  shortages  and  fuels  wage  growth.  The 
European Commission’s quarterly labour shortages 
indicator,  which  measures 
the  proportion  of 
companies reporting a lack of qualified labour as a 

(4)  Defined as being willing and able to work but not actively 

searching for jobs. 

8 

-10-50510200420052006200720082009201020112012201320142015201620172018Capital accountSecondary income balancePrimary income balanceTrade balance - servicesTrade balance - goodsTrade balanceCurrent account balanceNet lending/borrowing0510152025556065707580852000Q12001Q12002Q12003Q12004Q12005Q12006Q12007Q12008Q12009Q12010Q12011Q12012Q12013Q12014Q12015Q12016Q12017Q12018Q1% of labour force% of populationUnemployment rate 15-74 (rhs)Activity rate 20-64Employment rate 20-64 
 
 
 
                                                           
1. Economic situation and outlook 

for  the  medium  and  highly  educated.  The  rate  of 
young  people  not  in  employment,  education  or 
training,  remains  relatively  high  and  the  Roma 
population  faces  persistent  challenges  in  entering 
employment.  The  gender  employment  gap  is 
decreasing but women with young children tend to 
stay outside the labour market longer than in most 
EU  countries,  partly  due  to  the  lack  of  available 
childcare facilities. 

Poverty  rates  remain  low  but  social  exclusion 
remains a serious challenge in some regions. In 
2017, the at-risk-of poverty or social exclusion rate 
decreased further and reached 16.3 %, significantly 
below the EU average of 22.4 % (5), reflecting also 
low income inequality. However, close to 200 000 
Roma  people  live  in  marginalised  communities 
often  without  access  to  basic  infrastructure  and 
public services. 

Income  and  wealth  are  comparatively  evenly 
inequality  of  opportunities 
distributed  but 
remains  high.  For  Slovakia, 
the  S80/S20 
indicator,  which  measures  the  ratio  of  incomes  of 
the  richest  20 %  of  households  compared  to  the 
poorest,  is  among  the  lowest  in  the  EU  (3.5 
compared to the EU average of 5.1 in 2017). This 
is  due  to  low  wage  dispersion,  rather  than  the 
redistributive effect of the tax and benefit  system. 
Gross  disposable  household  income  per  person 
grew  at  only  around  half  the  rate  of  GDP  per 
person  between  2010  and  2017,  indicating  that 
increases in income have reached households only 
to  some  extent,  i.e.  low  inclusiveness  of  growth. 
Wealth  inequality  is  also  among  the  lowest  in  the 
EU,  partly  due  to  a  high  rate  of  home  ownership. 
Inequality of opportunities remains high, as shown 
by the high poverty risk faced by children of low-
skilled parents. 

Regional disparities 

Despite  almost  unrivalled  economic  growth 
compared  to  most  EU  countries,  regional 
disparities remain large. In 2016, GDP per head 
(in  power  purchasing  standards)  ranged  between 
184 % of the EU average in the capital region and 
53 %  in  the  less  developed  NUTS  2  region  of 

(5)  Income data from the European Union Statistics on Income 
and  Living  Conditions  refer  to  the  previous  year  for  all 
Member  States  except  from  Ireland  and  the  United 
Kingdom. 

production  constraint,  rose  by  7  pps  in  2017  and 
stood  at  19.3 %  in  2017.  This  is  the  highest  level 
recorded  since  EU  accession  in  2004  (European 
Commission,  2018).  Reported  labour  shortages 
were particularly high in industry, followed by the 
construction  sector and services (Graph 1.6). Half 
of  the  companies  that  tried  to  recruit  Information 
specialists 
and  Communications  Technology 
reported  problems 
these  vacancies. 
in  filling 
Increasing  labour  shortages  are  helping  to  bid  up 
wages at a faster rate and to increase net earnings, 
which  are  still  at  relatively 
in 
comparison to other EU countries. 

levels 

low 

Graph 1.6: 

Labour shortage index 

Source: EMPL calculations on the business and consumer 
survey. Annual data obtained from raw quarterly/monthly 
seasonally adjusted data. 

The number of unfilled vacancies is rising in the 
public  sector.  Low  salaries  in  public  services  are 
among the contributing factors, especially in more 
expensive  regions  and  some  professions  such  as 
nurses, teachers and social services workers. In the 
medium-term perspective, these sectors are also to 
be  further  affected  by  the  age  structure  of  their 
staff  and  difficulties  in  replacing  retiring  staff.  In 
the  education  sector,  close  to  40 %  of  employees 
are  above  the  age  of  50  and  the  situation  is  only 
slightly  better  in  healthcare  and  social  work 
(Lubyová, M., Miroslav, S. et al., 2016). 

The low labour market participation of women 
regional 
and  disadvantaged  groups  and 
disparities  hamper 
cohesion.  The 
employment rate of the low-skilled rose in 2017 to 
37.3 %  but  it  is  still  only  half  the  equivalent  rate 

social 

9 

-5,00,05,010,015,020,025,030,0200320042005200620072008200920102011201220132014201520162017buildingindustryservices 
 
                                                           
1. Economic situation and outlook 

Východné  Slovensko  (Graph  1.7).  The  capital 
region also outperforms the remaining regions in a 
wider  range  of  economic  indicators  such  as  the 
labour  productivity  and 
level  of 
salaries. 

investment, 

from  coal  mining,  the  catching-up  of  the  least 
developed  districts  and 
to 
empower the marginalised Roma communities (see 
Section 3.4.3). 

targeted  measures 

Graph 1.7: 

Regional disparities 

Inflation 

Annual  consumer  price  inflation  settled  at 
2.5 % in 2018 and is set to remain elevated. The 
services sector has become the key driver of price 
dynamics,  closely  followed  by  processed  food. 
After  years  of  negative  contributions,  energy 
prices  have  begun  to  add  to  overall  inflationary 
pressures. By contrast, non-industrial energy goods 
contributed  only  mildly  to  the  overall  price 
increase in 2018. Food prices are expected to ease 
somewhat  while  the  prices  of  some  energy  items 
that are regulated by a state agency are expected to 
rise  in  2019.  Importantly,  the  swift  growth  of 
wages is set to spill over into services prices in the 
coming  years.  Overall,  consumer  price  growth  is 
expected to remain around 2.5 %. 

Graph 1.8:  Consumer inflation (y-o-y, %) 

Source: European Commission 

Credit growth 

The  buoyant  economy  is  set  to  support  credit 
growth  for  both  households  and  non-financial 
corporations.  Record-low 
rates  and 
favourable  labour  market  outcomes  have  and  will 
continue to stimulate credit growth to households, 
even if it may have peaked in the first half of 2017. 
Since  then  its  annual  growth  has  eased,  but  it 
remains  above  10 %.  Slower  mortgage  lending 

interest 

Source: European Commission 

Labour market and social indicators show more 
acute  challenges  in  Eastern  and  South-Eastern 
Slovakia. Territorial disparities in terms of labour 
market  and  social  inclusion  indicators  remain 
significant. The regional dispersion in employment 
rates  is  substantial  and  persistent.  The  continuous 
outflow  of  medium-  and  highly  skilled  graduates, 
most notably from Eastern Slovakia to the West or 
other  EU  countries,  may  further  intensify  the 
(European  Commission, 
regional  differences 
2018g).  With  the  exception  of  the  capital  region, 
all  regions  in  Slovakia  had  population  growth 
below  the  EU  average  in  the  period  2010-2016. 
The health status of the population and the access 
to  healthcare  services  in  these  regions  is  also 
affected by the regional differences. 

an 

underdeveloped 

The  current  shape  of  regional  disparities  is  a 
result  of  several  factors.  These  include  weaker 
infrastructure, 
business 
environment,  a  low  rate  of  innovation  and  an 
unfavourable  educational  structure  in  some  of  the 
regions.  Lagging  regions  are  not  uniform  and 
display 
needs. 
Examples  include  the  transition  of  Horná  Nitra 

development 

idiosyncratic 

10 

-2%-1%0%1%2%3%2013M012013M042013M072013M102014M012014M042014M072014M102015M012015M042015M072015M102016M012016M042016M072016M102017M012017M042017M072017M102018M012018M042018M072018M10EnergyNon-energy ind. goodsProcessed foodServicesUnprocessed foodHICP 
 
 
 
1. Economic situation and outlook 

low  credit  costs  (NBS  2017)  and  gains  in  real 
disposable income by households. The increase in 
building  permits  and  residential  investment  have 
also  mitigated  demand  pressures  on  prices. 
Envisaged  slower  employment  growth  and  the 
tightening of credit standards by the National Bank 
of  Slovakia  are  likely  to  restrain  demand  and 
shield the housing market from overheating. 

Graph 1.10:  House prices 

to  be 

appears 

the  major 

growth 
factor 
underpinning  the  slowdown  in  total  credit  to 
households.  Furthermore,  macro-prudential  policy 
measures  effective  from  July  2018  (NBS,  May 
2018)  are  likely  to  relax  demand  pressures  in  the 
housing market by restricting credit supply. Credit 
flows to non-financial corporations remain strong. 
Loans  for  investment  purposes  kept  growing 
solidly at a rate of 8 % year-on year, while growth 
in  loans  to  small  and  medium-sized  enterprises 
slowed to below 5 %. 

Private debt levels entail certain vulnerabilities. 
Sustained  growth  in  household  and  corporate 
sector indebtedness may pose a risk to the stability 
of  the  economy  in  the  event  of  a  negative 
economic  shock.  Household  debt  reached  40.6 % 
of  GDP  in  2017  and  continues  to  rise.  Similarly, 
the indebtedness of non-financial corporations has 
risen significantly and increased by 10 pps of GDP 
between 2013 and 2017 to 55.5 % of GDP. 

Graph 1.9: 

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

Source: National Bank of Slovakia 

Public finances 

to 

The  general  government  deficit  has  been 
declining  since  2015  mainly  due 
the 
favourable economic climate. The deficit reached 
0.8 %  of  GDP  in  2017  and  is  expected  to  have 
declined  to  0.6 %  in  2018.  The  booming  labour 
market significantly strengthened the revenue side 
in  recent  years  as  labour  income  tax  and  social 
security  contributions  soared.  Similarly,  value 
added  tax  collection  continues  to  improve  above 
the pace of private consumption growth. Corporate 
income tax revenue also recovered in 2017. 

Source: ECB, European Commission 

Housing market 

Despite fast price rises, the housing market does 
not  show  major  signs  of  overvaluation  yet. 
Although  property  prices  keep 
increasing, 
developments so far have been broadly in line with 
the  strong  economic  and  financial  fundamentals. 
Property price growth reached a peak at the turn of 
2017  and  has  eased  since.  Strong  demand  that 
pulled property prices out of their post-crisis slump 
reflects favourable affordability backed by record-

The  budgetary  outlook  appears  favourable  in 
the  medium  term.  The  government  intends  to 
achieve  a  balanced  budget  for  the  first  time  in 
2019.  A  new  insurance  premium  tax  was  brought 
in and further measures to improve tax collection, 
such  as  online  cash  registers  and  special  fuel 
markers,  are  also  envisaged.  Most  of  the  revenue 
increases will be used to cross-finance expenditure 
measures  in  net  terms,  notably  a  substantial 
increase  in  public  wages  in  2019  (European 

11 

-5%0%5%10%15%20%janv-13avr-13juil-13oct-13janv-14avr-14juil-14oct-14janv-15avr-15juil-15oct-15janv-16avr-16juil-16oct-16janv-17avr-17juil-17oct-17janv-18avr-18juil-18oct-18Total loansLoans to NFCLoans to HHLending for housing-4%-2%0%2%4%6%8%10%11001150120012501300135014001450Price €/m2Y-o-Y growth (rhs) 
 
 
 
 
1. Economic situation and outlook 

Commission,  2018i).  The  debt-to-GDP  ratio  is 
expected  to  have  declined  to  just  below  49 %  in 
2018,  with  further  declines  expected  from  2019 
onwards. 

12 

 
 
 
1. Economic situation and outlook 

Table 1.1: 

Key economic and financial indicators — Slovakia 

(1) NIIP excluding direct investment and portfolio equity shares 
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the 
section on taxation. 
Source: Eurostat and ECB as of 31-1-2019, where available; European Commission for forecast figures (Winter forecast 2019 for 
real GDP and HICP, Autumn forecast 2018 otherwise) 

13 

2004-072008-122013-1520162017201820192020Real GDP (y-o-y)7,81,92,83,13,24,24,13,5Potential growth (y-o-y)5,53,72,32,32,73,43,63,6Private consumption (y-o-y)6,11,00,92,93,5...Public consumption (y-o-y)3,32,04,21,61,7...Gross fixed capital formation (y-o-y)9,7-1,97,6-9,43,4...Exports of goods and services (y-o-y)17,74,05,55,55,9...Imports of goods and services (y-o-y) 16,41,66,13,45,3...Contribution to GDP growth:Domestic demand (y-o-y)6,60,42,9-0,43,0...Inventories (y-o-y)0,6-0,50,21,5-0,5...Net exports (y-o-y)0,61,9-0,42,00,7...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0,40,70,20,20,30,40,50,5Capital accumulation (y-o-y)1,30,70,30,30,41,00,90,9Total factor productivity (y-o-y)3,82,41,81,81,92,02,12,2Output gap2,00,0-2,1-0,30,20,71,31,2Unemployment rate14,912,813,09,78,16,96,36,0GDP deflator (y-o-y)3,11,00,1-0,51,22,62,72,6Harmonised index of consumer prices (HICP, y-o-y)4,12,70,3-0,51,42,52,52,4Nominal compensation per employee (y-o-y)8,43,82,62,15,25,06,46,2Labour productivity (real, person employed, y-o-y)6,31,61,90,71,0...Unit labour costs (ULC, whole economy, y-o-y)2,02,20,71,34,22,73,23,3Real unit labour costs (y-o-y)-1,01,20,61,82,90,10,50,7Real effective exchange rate (ULC, y-o-y)6,22,4-0,20,83,31,30,91,0Real effective exchange rate (HICP, y-o-y)6,72,3-0,40,6-0,22,10,10,2Savings rate of households (net saving as percentage of net disposable income)0,91,41,63,02,4...Private credit flow, consolidated (% of GDP)7,04,66,39,55,9...Private sector debt, consolidated (% of GDP)51,968,780,990,596,1...of which household debt, consolidated (% of GDP)13,124,732,338,040,6...of which non-financial corporate debt, consolidated (% of GDP)38,844,048,652,555,5...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)1,53,43,83,93,3...Corporations, net lending (+) or net borrowing (-) (% of GDP)-3,03,14,30,2-0,40,61,52,2Corporations, gross operating surplus (% of GDP)27,126,425,924,824,124,625,425,9Households, net lending (+) or net borrowing (-) (% of GDP)-1,5-0,50,00,70,30,20,40,5Deflated house price index (y-o-y).-3,62,27,04,4...Residential investment (% of GDP)2,72,62,42,82,7...Current account balance (% of GDP), balance of payments-7,2-3,70,4-2,2-2,00,01,22,1Trade balance (% of GDP), balance of payments-2,8-0,23,32,61,9...Terms of trade of goods and services (y-o-y)-0,7-1,2-0,2-0,4-0,6-0,2-0,3-0,1Capital account balance (% of GDP)0,21,32,02,00,9...Net international investment position (% of GDP)-47,3-62,1-63,4-66,6-65,6...NIIP excluding non-defaultable instruments (% of GDP) (1)0,3-10,1-12,5-14,8-15,1...IIP liabilities excluding non-defaultable instruments (% of GDP) (1)43,557,769,271,687,8...Export performance vs. advanced countries (% change over 5 years)83,916,95,64,41,9...Export market share, goods and services (y-o-y)..0,26,7-0,7...Net FDI flows (% of GDP)-5,7-2,00,2-0,8-2,0...General government balance (% of GDP)-2,7-5,3-2,7-2,2-0,8-0,6-0,3-0,1Structural budget balance (% of GDP)..-2,0-2,1-0,9-0,8-0,8-0,6General government gross debt (% of GDP)34,040,453,551,850,948,846,444,2Tax-to-GDP ratio (%) (3)30,528,731,232,433,233,233,232,9Tax rate for a single person earning the average wage (%)22,022,322,923,2....Tax rate for a single person earning 50% of the average wage (%)14,214,715,415,0....forecast 
 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

of 

all 

63% 

least  ‘some  progress’. (6) 

Since  the  start  of  the  European  Semester  in 
2011, 
country-specific 
recommendations  addressed  to  Slovakia  have 
  By 
recorded  at 
contrast,  37%  have  recorded 
'no 
progress'  (see  Graph  2.1).  For  instance,  some 
progress has been achieved in the area of taxation 
and  tax  compliance,  in  reforming  the  pension 
system, increasing labour market participation and 
in reducing poverty.  

'limited'  or 

Graph 2.1:  Overall multiannual implementation of 2011-

2018 country-specific recommendations (CSR) 
to date 

* The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact. 
** 2011-2-12: Different CSR assessment categories 
*** The multiannual CSR assessment looks at the 
implementation from the first year of adoption up until the 
2019 Country Report. 
Source: European Commission 

Slovakia has seen a gradual improvement in its 
fiscal position, but long-term challenges persist. 
Following  the  timely  correction  of  Slovakia’s 
excessive  deficit  situation  by  2013,  the  general 
government deficit was reduced further until 2017, 
when the deficit reached -0.8 % of GDP. The fiscal 
consolidation  was  driven  by  buoyant  revenue 
growth  as  well  as  adjustments  on  the  expenditure 
side. Tax revenues growth was supported by swift 
and  tax-rich  economic  growth,  but  was  also 
facilitated  by  policy  efforts 
tax 
collection  and  reduce  tax  fraud,  particularly  in 

improve 

to 

(6)  For  the  assessment  of  other  reforms  implemented  in  the 

past see in particular section 3. 

tax.  Ensuring  gong-term 

value-added 
fiscal 
sustainability  remains  a  challenge  in  light  of 
considerable  spending  pressures  from  population 
ageing, which are projected to push up pension and 
healthcare  spending 
the  coming 
decades.  Improving  the  cost-effectiveness  of  the 
healthcare  system  has  been  a 
long-standing 
the  Slovak  government  has  paid 
challenge 
considerable  policy  attention  to,  with  efficiency 
savings 
reorganisation  plans 
strategic 
and 
beginning to materialise.  

levels  over 

Labour  market  policies  have  helped 
to 
underpin a significant improvement in the jobs 
market,  with  a  much-needed 
focus  on 
disadvantaged  groups.  The  previously  high 
unemployment  rate  has  witnessed  a  remarkable 
decline  from  2014  onwards  and  has  now  reached 
historic lows of close to 6%. Improving support for 
the  long-term  unemployed  and  other  vulnerable 
groups  has been  high on the  government's agenda 
for  a  number  of  years.  Improving  the  range  and 
effectiveness  of  active  labour  market  policies 
remains  a  challenge  and  is  make  more  acute  by 
growing  labour  shortages.  Some  advances  have 
been  made 
in  providing  better-targeted  and 
individualised  support  for  jobseekers,  particularly 
the  long-term  unemployed,  but  support  services 
are  still  relatively  thin.  Very  little  progress  has 
been  made  in  tackling  low  Roma  participation  in 
the labour market.  

to  be  an 

Education  and  childcare  reforms  have  been 
undertaken but they may take further time and 
effort  to  produce  better  outcomes.  Progress  has 
been  made  towards increasing the capacity of and 
access  to  early  childhood  education  and  care, 
particularly  for  the  over  threes,  but  the  lack  of 
childcare  supply  continues 
issue.  
Mediocre education results at secondary level and 
a  lack  of  job-market  relevance  and  international 
attractiveness of universities  have  made  education 
reforms  and  better  funding  a  key  policy  priority, 
however  tangible  reform  results  can  only  be 
observed  in  the  area  of  vocational  education  and 
training.  Recent  pay  rises  for  teachers  came  as 
natural  response  to  the  tightening  labour  market, 
insufficient 
but  as  such  are 
the 
the  profession.  Supporting 
attractiveness  of 
socially  inclusive  education,  including  of  Roma 
pupils,  deserves  continued  efforts  and  political 
commitment. 

in  raising 

14 

No Progress6%Limited Progress31%Some Progress55%Substantial Progress8%Full Implementation0% 
 
 
                                                           
2. Progress with country-specific recommendations 

in  combatting 

been  made 
the  problem  of 
corruption.  Only  limited  progress  has  been  made 
towards improving the effectiveness of  the justice 
system  as  concerns  over  the  independence  of  the 
judiciary  persist.  Limited  progress  has  been  made 
in  stimulating  business  innovation,  and  measures 
to consolidate the public research system and make 
it more efficient have not yet been adopted.  

Reforming  public  services  and  the  public 
administration has proven to be a slow process, 
but  with  notable  progress  in  some  areas.  The 
Slovak government has committed itself to greater 
efficiency and effectiveness in public spending and 
administration,  an  ambition  underpinning 
the 
strategic  spending  reviews  under  the  Value  for 
Money  initiative.  Progress  here  is  all  the  more 
important  given  persistent  weaknesses  in  public 
administration  and  justice  system,  which  still 
affect 
the  business  environment  and  deter 
entrepreneurship  and  investment.  Human  resource 
management and lacking analytical capacity in the 
civil  service  has  been  improved.    There  are  clear 
in  modernising  public 
signs  of  progress 
procurement,  where 
lack  of  competition  and 
transparency  have  been  long-standing  challenges. 
Perceptions  of  corruption  remain  stubbornly  high 
and have been met with only limited determination 
to prosecute high-level corruption cases.  

in 

the 

second 

Slovakia has made some progress in addressing 
the  2018  country-specific  recommendations. (7) 
Some  progress  has  been  made  with  respect  to  the 
fiscal-structural  part  of  the  first  country-specific 
recommendation,  where  relevant  advances 
in 
improving  the  cost-effectiveness  of  the  healthcare 
system  are  to  be  noted.  Some  progress  is  also 
country-specific 
visible 
recommendation,  as  various  activation  and  job-
matching  measures  and  programmes  have  been 
introduced. The implementation of the Action Plan 
for the long-term unemployed is progressing and a 
planned  1,800  new  childcare  places  have  been 
created 
reform 
in  2018.  A  new  national 
programme  for  the  development  of  education  and 
upbringing  (2018-2027)  adopted  in  2018  aims  at 
improving  the  quality  of  education,  increasing 
children's  participation 
childhood 
education  and  care,  and  primary  education, 
including  measures  dedicated  to  Roma  children, 
however,  the  progress  has  been  limited  so  far. 
Only limited progress has been made in addressing 
the third recommendation. The Public Procurement 
Office  has helped to speed up public procurement 
procedures  and  increase  the  absorption  of  EU 
funds.  By  contrast,  no  discernible  progress  has 

early 

in 

(7)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
the 
country-specific  recommendation 
Overview  Table  in  the  Annex.  This  overall  assessment 
does  not  include  an  assessment  of  compliance  with  the 
Stability and growth Pact. 

is  presented 

in 

15 

 
                                                           
 
 
 
 
2. Progress with country-specific recommendations 

Table 2.1: 

Summary table on 2018 CSR assessment 

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

16 

Slovakia Overall assessment of progress with the 2018 CSRs: Some progress CSR 1: Ensure that the nominal growth rate of net primary government expenditure does not exceed 4.1 % in 2019, corresponding to an annual structural adjustment of 0.5 % of GDP.  Implement measures to increase the cost effectiveness of the healthcare system and develop a more effective healthcare workforce strategy.  Some progress*  Some progress in increasing the cost-effectiveness of the healthcare sector and addressing staffing shortages. CSR 2: Reinforce activation and upskilling measures, including quality targeted training and individualised services for disadvantaged groups, in particular by delivering on the action plan for the long-term unemployed. Foster women's employment, especially by extending affordable, quality childcare. Improve the quality and inclusiveness of education, including by increasing the participation of Roma children in mainstream education from early childhood onwards.  Some progress  Some progress has been made in improving activation and upskilling measures for disadvantaged groups.   Some progress has also been made in boosting the  employment of women.    Limited progress has been made in improving the quality and inclusiveness of education.  CSR 3: Increase the use of quality-related and lifecycle cost criteria in public procurement operations.  Tackle corruption, including by ensuring enforcement of existing legislation and by increasing accountability at the level of police and prosecution.  Improve the effectiveness of the justice system, in particular by safeguarding independence in judicial appointment procedures.  Reduce the fragmentation of the public research system and stimulate business innovation, including for small and medium-sized enterprises. Limited progress  Some progress has been made in modernising public procurement operations.   Limited progress has been made in the fight against corruption.     Limited progress has been in improving the effectiveness of the justice system.     Limited progress has been made in creating a better-integrated public research system and stimulating business innovation.    
 
 
 
2. Progress with country-specific recommendations 

Box 2.1: EU funds and programmes contribute to addressing structural challenges and to 
fostering growth and competitiveness in in Slovakia 

Slovakia  is  one  of  the  largest  beneficiaries  of  EU  solidarity.  In  the  current  Multiannual  Financial 
Framework, Slovakia receives more than EUR 15 billion in support to address development challenges. This 
is  equivalent  to  around  2.5  %  of  GDP  annually.  This  significant  budget  is  to  be  invested  in  various  areas, 
from creating jobs and growth to supporting sustainable transport as well as protecting the environment 
and  investing  in  research  and  innovation.  At  the  end  of  2018,  around  70 %  of  the  total  available  funds 
equalling some EUR 10.7 billion had already been allocated to specific projects in various sectors. 

EU  funds  have  helped  to  address  policy  challenges  identified  in  the  2018  country-specific 
recommendations. Slovakia progressed with the implementation of the Action plan for the Integration of the 
Long-Term Unemployed, driven by the European Social Fund, supporting disadvantaged groups with training 
and individualised services. European Structural and Investment Funds will also help to build or modernise 
up to 500 childcare facilities, out of which 300 will target the municipalities with high share of marginalised 
Roma communities. The European Social Fund further contributes to the reform of vocational education and 
training,  in  particular  in  dual  education.  By  2018,  investments  mainly  driven  by  European  Structural  and 
Investment Funds have led to the construction or modernisation of 110 km of motorways and expressways to 
bring regions closer together and to unlock their economic potential. EU Funds also supported the digitisation 
of state administration and public services. 

In addition, the Commission can provide tailor-made technical support at the Member State’s request 
via  the  Structural  Reform  Support  Programme  to  help  Member  States  implement  growth-sustaining 
reforms to address challenges identified in the European Semester process or other national reforms. 
Slovakia,  for  example,  received  support  to  improve  its  public  finance  performance,  including  through 
national capacity building to run expenditure review processes and achieve smarter expenditure allocation as 
well as through the design of a strategy to foster voluntary tax compliance. The Commission is also assisting 
the  authorities  in  their  efforts  to  improve  the  efficiency  of  the  health  system,  in  particular  by  providing 
options for optimising the hospital network in order to deliver effective healthcare and strengthen the role of 
general practitioners.  

EU  funds  help  to  mobilise  private  investment.  European  Structural  and  Investment  Funds  mobilise 
additional private capital by allocating nearly EUR 900 million in the form of loans, guarantees and equity. 
This investment is expected to leverage additional private investment with a multiplier of approximately 14 
for  guarantees,  2.2  for  loans  and  1.7  for  equity  investments.  In  addition,  the  European  Fund  for  Strategic 
Investments  has  allocated  a  total  of  EUR  537  million  to  projects  in  Slovakia,  triggering  EUR  1 billion  in 
additional  private  and  public  investments.  11  531  small  and  medium-sized  enterprises  and  mid-cap 
companies are expected to benefit from better access to finance.  

EU  funds  and  programmes  under  direct  management  complemented  the  European  Structural  and 
Investment  Funds.  Under  the  Connecting  Europe  Facility,  EUR 710 million  were  allocated  mostly  to 
railway projects on strategic transport networks in Slovakia. Horizon2020 provided almost EUR 90 million to 
285 Slovak research institutions, innovative firms and individual researchers.  

EU  actions  strengthen  national,  regional  and  local  authorities  and  the  civil  society.  More  than 
EUR 300 million have been allocated to strengthening capacity of public administration at different levels by 
prompting close cooperation with stakeholders. As regards multi-layer cooperation, the Prešov region was a 
pioneer  of  the  Catching  up  Regions  Initiative  which  will  help  to  unlock  the  potential  of  Eastern  Slovakia, 
with  the  World  Bank  being  a  key  partner.  The  second  active  initiative  in  Slovakia,  the  Coal  Regions  in 
Transition Initiative, will help with the socio-economic and technological transformation of the Horna Nitra 
region for a future after the phasing-out of coal mining.  

More information at: https://cohesiondata.ec.europa.eu/countries/SK 

17 

 
 
 
 
 
 
 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

Taxation and tax compliance 

Slovakia’s  fiscal  deficit  is  falling  and  fiscal 
revenues in relation to GDP are increasing from 
low  levels.  The  general  government  deficit  fell 
from 2.6 % of GDP in 2015 to 0.8 % in 2017, and 
government  debt  was  reduced  to  50.9%  of  GDP 
over  the  same  period.  In  2017,  the  tax-to-GDP 
ratio  stood  at  33.0 %  of  GDP  (EU  average:  39.0) 
and is projected to remain around that level in both 
2018  and  2019 
(Commission  2018  autumn 
forecast). 

Revenues  from  labour  taxes  are  the  biggest 
source of tax revenue. (8) Labour taxes and social 
security contributions are particularly important in 
the  current  tax  mix  (53.9 %  of  total  taxation; 
49.7 % in EU in 2016). By contrast, the  shares of 
revenues  from  consumption  and  capital  taxes  on 
total taxation are below the EU average. Taxes on 
production  and  imports  are  some  of  the  lowest  in 
the EU. The preponderance of employment-related 
revenues  exposes  public  finances  to  cyclical  and 
structural  changes  in  labour  market,  including 
from greater automation and the move to industry 
4.0 (see section 3.3). 

taxes  on 

to  growth, 

less  detrimental 

Revenue  from  recurrent  property  taxes  and 
environmental  taxation  are  both  among  the 
lowest  in  the  EU.  While  these  tax  types  are 
total 
considered 
revenue  from  recurrent 
immovable 
property stood at 0.4 % of GDP in 2017 (European 
Commission, 2019b), which is considerably lower 
than  the  EU  average  of  1.6 %.  Revenue  from 
environmental  taxes,  at  1.8 %  of  GDP  in  2017,  is 
also  somewhat  below  the  EU  average  of  2.4 %. 
The  implicit  tax  rate  on  energy  was  among  the 
lowest  in  the  EU  in  2016,  at  115.2%  (EU: 
246.8 %)(9).  This  is  an  indication  that  Slovakia 
may be  underutilising property and environmental 
taxation as revenues. Well-designed policies could 
potentially  shift the  tax-burden away  from  labour, 
shield  vulnerable  groups  such  as  low-income 

(8)  These consist of personal income taxes and social security 
contributions.  Social  contributions  as  %  of  total  taxation 
were, at 43.8 %, the highest in the EU (25.2 %) in 2016. 
(9)  The  implicit  tax  rate  on  energy  is  expressed  in  euro  per 

tonne of oil equivalent (TOE). 

families 
from  undue 
distortions from direct taxation. 

tax 

rises,  and 

reduce 

The tax wedge (10) on labour is higher than the 
EU average across the income scale. The highest 
difference  in  the  tax  wedge  was  for  a  single  low-
income earner (at 67 % of the average wage) with 
two  children,  which  stood  at  28.5 %  in  2017, 
compared  to  an  EU  average  of  17.9 %.  Also,  the 
tax  wedge  for  first  earners  with  two  children  and 
income  at  67 %  of  average  wage  was  3.2 pps 
higher  than  the  EU  average  in  2017.  When  the 
secondary  earner  enters  the  labour  market,  the 
the  dependent  spouse 
primary  earner 
allowance. This represents a financial disincentive 
to  female  labour  market  participation  and  may 
partly  explain  Slovakia's  low  female  employment 
rate  of  64.7%  in  2017.  Nevertheless,  Slovakia’s 
the 
relatively 
disincentive is not especially pronounced. 

inactivity 

suggests 

loses 

trap 

low 

Graph 3.1.1:  Value-added tax compliance gap (2012-

2016) 

Source: Centre for Social & Economic Research/CASE (2018) 

Tax  compliance  has  improved.  Between  2015 
and 2016, compliance in paying value-added taxes 
improved, with the value-added tax gap decreasing 
by  3.6 pps.  However,  the  level  of  corresponding 
revenues  lost  in  2016  was  estimated  at  25.7 %  of 
theoretical  value-added  tax  liability,  considerably 
above the EU average of 12.3 %. The rise in value-
that  policy 
added 

tax  compliance  suggests 

(10)  The tax wedge shows the % difference between the costs of 
a worker to the employer and the employee’s net earnings. 

18 

 
 
                                                           
 
                                                           
3.1. Public finances and taxation 

tax  rules  themselves  as  well  as  the  costs  of 
interacting  with  tax  authorities  —  compared  to 
other  EU  Member  States,  particularly  for  direct 
taxes.  Entrepreneurs  call  for  greater  stability  and 
predictability of the tax environment. (12) 

Audit  activities  and  cross-checking  remain 
cornerstones  of  the  compliance  strategy.  The 
frequency  of  value-added  tax  audits  declined  in 
2017  amidst  a  shift  towards  income  tax  audits. 
Voluntary  compliance  is  likely  to  be  encouraged 
through  the  introduction  of  a  tax  reliability  index 
(13)  adopted  in  December  2018  that  assesses  a 
taxpayer's  risk  profile  on  the  basis  of  publicly 
known  criteria.  Top-ranked  tax-payers  will  be 
entitled to enhanced services. (14) 

Fiscal framework and spending review 

technology, 

Regular spending reviews supported the public 
discussion  on  the  quality  of  public  finances. 
Since  2016,  spending  reviews  prepared  in  the 
context  of  the  ‘Value  for  Money’  project  have 
covered  numerous  areas  such  as  healthcare, 
transport,  education, 
information 
environment,  labour  market  and  social  policies, 
agriculture,  marginalised  Roma  communities  and 
the  public  wage  bill. (15)  Selected  studies  were 
made  also  in  the  area  of  defence.  Reviews  are 
followed  by 
reports 
prepared by the Implementation Unit at the Office 
of the Prime Minister.  

implementation 

interim 

Spending  review  assessments  are 
to  be 
integrated  in  the  budgetary  process.  So  far 
spending  reviews  have  had  a  limited  impact  on 
government  priorities  and  spending  plans.  The 
amendment  of  the  Act  on  Budgetary  Rules, 
approved  by 
the  government,  will  oblige 
subsequent  governments  to  carry  out  spending 
reviews  covering  an  amount  equivalent  to  at  least 
half  of  the  expenditure  volume  in  the  general 
government  budget  over  a  four-year  period. 
Reviewing  the  implementation  of  these  spending 
reviews  recommendations  would  be  a  mandatory 
part of the budgetary documentation. 

(12)  E.g.  Act  No.  595/2003    Coll.  Income  Tax  Act  was 

amended at least 76 times during last 15 years. 
(13)  The formula and calculation will be confidential. 
(14)  The  tax  authority  shall  send  the  taxable  entity  a  notice  of 
special  tax  regimes  (benefits).  List  these  regimes  will  be 
published on website of the financial administration. 
(15)  See European Commission (2017, Country Report) 

measures  taken  in  recent  years  (such  as  the 
‘control  statement’)  have  started  to  show  effect, 
even  if  it  is  still  too  early  for  a  comprehensive 
evaluation.  However,  measures  like  the  reduction 
of  fees  for  the  issuance  of  tax  rulings  only  had 
limited  effects.  Voluntary  tax  compliance  may 
potentially improve if guided by appropriate policy 
efforts, while call centres and pre-filled tax returns 
continue to provide useful and practical support to 
taxpayers. 

is 

to 

likely 

improve  value-added 

increase  value-added 

Anti-fraud  measures  should  improve  control 
tax 
efficiency  and 
collection.  Notably,  a  unified  analytical  centre  is 
planned to be set up. Moreover, entrepreneurs will 
be  obliged  to  use  online  cash  registers  ('eKasa'), 
tax 
which 
collection  and  tackle  fraud  at  the  retailers’  level. 
Similar  improvements  are  anticipated  from  the 
introduction  of  fuel  additives  ('nano-markers'), 
which  should  help  reduce  the  high  tax  gap  in  the 
excise duties on mineral oils due to smuggling and 
counterfeiting  of  fuels. (11)  The  true  impact  of 
these  measures  is  likely  to  become  visible  by  the 
end of 2019. 

In  2018,  specific  anti-avoidance  measures  were 
introduced. Greater use of fair value instead of the 
historical  prices  should  strengthen  the  tax  regime 
for  mergers  and  acquisitions.  Anti-avoidance 
measures  introduced  in  2018  include  an  exit  tax 
and  rules  on  hybrid  mismatches.  Controlled 
foreign corporation rules for legal entities apply as 
of 1 January 2019. Taken together, these measures 
are  expected  to  increase  the  amount  of  the  tax 
levied.  Specific  base  erosion  and  profit  shifting 
challenges  were  addressed  by  strengthening 
various legal definitions (e.g. beneficiary; owner of 
income;  permanent  establishment  of 
foreign 
companies operating through digital platforms; and 
income from sources in Slovakia). In addition, the 
definition  of  tax  residence  for  individuals  was 
broadened  by  including  non-residents  with  strong 
ties to living in the country.  

taxation  system 

imposes  considerable 
The 
compliance costs on businesses. Slovakia shows a 
relatively  high  cost  of 
for 
businesses — which captures both the effect of the 

tax  compliance 

(11)  The  Ministry  of  Finance  estimated  the  tax  gap  in  excise 
taxes  from  mineral  fuels  at  between  13.7  and  16.8  %  in 
2017. See Daňový report SR 2018, MFSR, 2018, p.49. 

19 

 
                                                           
                                                           
3.1. Public finances and taxation 

accumulate debt. At the end of 2017, the sector’s 
total  debt  amounted  to  EUR  1.46  billion (19) 
(Graph  3.1.2).  More  than  half  of  this  amount 
represented overdue liabilities, mostly to providers 
of  medical  supplies,  followed  by  the  Social 
Insurance  Agency.  In  2018, 
the  government 
carried  out  the  first  step  of  a  three-step  debt 
settlement plan  for hospitals.  This round for EUR 
187 million (20) should help reduce the growth rate 
of future arrears. To be eligible to participate in the 
final two steps of the programme, health providers 
are  required  to  negotiate  a  restructuring  plan  with 
the Ministry. However, the pattern of regular debt 
relief by the government does not appear to tackle 
the root causes leading to the steady accumulation 
of  arrears 
the  savings 
in  hospitals.  Despite 
associated  with  the  implementation  of  measures 
from  the  Value  for  Money  spending  review, 
revenues  from  health  insurers  fail  to  cover  the 
operating  costs  of  all  hospitals,  pointing 
to 
inadequate 
under-budgeting 
possible 
monitoring and management practices.  

and 

Graph 3.1.2:  Liabilities of health sector units included in 

general government (2012-2017) 

Source: Ministry of Health of the Slovak Republic 

The  implementation  of  reforms  to  improve  the 
system 
cost-effectiveness 
continues. (21)  Measures 
the 
in 
context  of  the  first  spending  review  have  reduced 

health 
implemented 

the 

of 

liabilities 

reported  by  health 

(19)  This is the amount of total liabilities in 2017. The amount 
consists  of 
insurance 
companies  (EUR 399 million),  healthcare  facilities  set  up 
non-profit 
by 
organisations 
established  by 
municipalities  and  regions  (EUR 131 million)  and  joint 
stock companies (EUR 60 million). 

EUR 873 million), 
facilities 

the  ministries 

and  health 

(20)  A maximum of EUR 585 million from state assets will be 

used to settle hospitals' debts. 
(21)  Kuenzel  and  Solanic  2018: 

the  Cost-
Effectiveness  of  Slovakia's  Healthcare  System,  EC, 
041/2018. 

Improving 

The  budgeting  framework  still  shows  certain 
gaps  in  terms  of  coverage,  time  horizon  and 
reliance  on  cash  accounting.  The  State  Budget 
Act  determines  budgetary  aggregates  only  for  a 
part  of  the  public  administration  and  one  year 
ahead. However, the ceilings do not cover the local 
government  sector,  social  security  and  other 
general  government  entities.  To  address  these 
shortcomings,  binding  expenditure  ceilings  were 
planned in the constitutional law of 2011 but have 
not  been  introduced.  Yet,  based  on  a  recently 
published  discussion  paper  by  the  Ministry  of 
Finance, the government plans to launch simulated 
expenditure  ceilings  in  2019  (Ministry  of  Finance 
2018e).(16)  The  purpose  and 
this 
initiative remains to be assessed in future. 

impact  of 

Debt sustainability analysis and fiscal risks  

finance 

faces  primarily 

Public 
long-term 
risks. (17) The fiscal sustainability gap indicator S2 
shows  that,  relative  to  the  baseline  no-policy-
change  scenario,  a  cumulated  improvement  of 
2.5 pps  of  GDP  in  the  structural  primary  balance 
would  be  required  to  stabilise  the  debt-to-GDP 
ratio  over  the  long  term.  This  result  is  due  to  the 
projected increase of ageing costs (contribution of 
2.4 pps of GDP), and a slightly unfavourable initial 
budgetary  position  (contribution  of  0.1 pps  of 
GDP).  Pensions  and  healthcare  outlays  are 
projected to remain the main drivers of Slovakia’s 
long-term  ageing  costs  (European  Commission 
2019). Taken jointly, these two items are expected 
to  contribute  by    1.8 pps  of  GDP  (European 
Commission,  2019a;  European  Commission, 
2017c)  As  a  result,  the  S2  indicator  implies  that 
long-term fiscal sustainability risks are medium for 
Slovakia.  (18)  This  assessment  excludes 
the 
the 
adverse  potential 
from  capping 
retirement  age 
is 
in 
currently under discussion in Parliament. 

impact 
the  constitution,  which 

Healthcare 

Despite  regular  debt  relief  from  the  public 
budget,  the  healthcare  sector  continues  to 

(16)  https://www.finance.gov.sk/sk/financie/institut-financnej-
politiky/publikacie-ifp/diskusne-studie/3-skrutkovac-
hodnotu-za-peniaze-oktober-2018.html  

(17)  For  an  overview  of  fiscal  sustainability,  see  European 

Commission (2019a) and Annex B. 

(18)  S2 determines the upfront structural adjustment required to 
stabilise the ratio of gross public debt/GDP in the long run. 

20 

2253374315506477911.06191781282873567302004006008001000120014001600201220132014201520162017Million EUROverdueCurrent 
                                                           
 
                                                           
 
3.1. Public finances and taxation 

wasteful  spending  on  health  by  about  EUR  108 
million per year in 2017 and 2018 vis-à-vis a target 
of  EUR 190  million.  The  interim  implementation 
report  on  the  second  healthcare  spending  review 
showed that only limited savings were generated in 
the first half of 2018. These were achieved mainly 
in  public  health  insurance,  while  spending  in 
hospitals  has  continued  to  grow.  The  greatest 
savings  were  attained  through  the  review  of 
medical aids and limiting the over-consumption of 
pharmaceuticals and cost-control improvements at 
the  National  Insurance  Company.  The  main 
features  of  the  eHealth  system,  launched  in  2017, 
are  operational,  and  the  piloting  of  the  diagnosis-
related group system — so far only for monitoring 
purposes  — 
is  gradually  progressing.  An 
ambitious  reform  of  the  hospital  network  to 
streamline  the  use  of  inpatient  resources  by 
concentrating  hospital  capacity  both  regionally  as 
well as functionally was recently developed, with a 
project timeline to 2030. 

Health workforce shortages are a challenge that 
disproportionately  affects  citizens  in  rural  and 
disadvantaged  areas.  The  number  of  nurses  per 
capita is lower than the EU average (5.7 compared 
to  8.4  per  1000  population  in  2016)  and  has 
decreased  sharply  in  the  past  years  due  to  the 
increasing  number  of  nurses  leaving  to  work 
abroad. Recent estimates by the Ministry of Health 
show  that  hospitals  face  a shortage  of  over  a 
thousand  nurses,  and  that  only  44 %  of  domestic 
nursing  graduates  actually  take  up  nursing  jobs 
(Ministry  of  Health,  2018).  To 
improve 
recruitment  and  retention  rates,  the  government 
plans to  increase salaries for nurses, midwives and 
health care assistants by between 10-16 % in 2019, 
and  to  set  up  incentives  for  nursing  graduates  to 
start their career in Slovakia. While the number of 
doctors in Slovakia is in line with the EU average, 
recruiting doctors in certain regions is a challenge. 
The  difference  in  the  doctors-to-population  ratio 
between  the  capital  region  and  the  rest  of  the 
country  (Graph  3.1.3)  is  one  of  the  highest  in  the 
EU,  posing  barriers  for  citizens'  ability  to  access 
care in a timely and equitable manner. 

The  lack  of  general  practitioners  and  excessive 
avoidable  hospitalisations  indicate  a  need  to 
strengthen primary care. Slovakia has one of the 
lowest  shares  of  general  practitioners  in  the  EU, 
and  only  9 %  of  medics  decide  to  specialise  in 
general  practice  (Giorno,  C.  and  K.  Londáková, 

2017c).  Shortages  of  general  practitioners  may 
lead  to  above-average  rates  for  avoidable  hospital 
admissions  negatively  affecting  efficiency  and 
quality  of  care.  Significant  differences  in  the 
geographical  distribution  of  general  practitioners 
are  observable  as  well,  implying  accessibility 
challenges and corresponding investment needs. 

Graph 3.1.3:  Medical personnel by NUTS 2 

Source: Eurostat, 2016 for medical doctors, 2014 for nurses 

improving  but 
is  gradually 
Public  health 
sizeable  socio-economic  health  disparities  exist. 
Over  the  last  five  years,  the  gap  with  the  EU 
average  life  expectancy  at  birth  has  narrowed  by 
life 
almost  five  months.  However, 
expectancy  for  Slovak  men  and  women  remained 
lower  than  the  EU  average  by  4.4  and  2.9  years, 
respectively. Differences based on socio-economic 
status  are  significant:  the  life  expectancy  gap 
between citizens  with tertiary education and those 
with less than lower secondary education was 10.4 
years in 2016. 

in  2016 

Quality  of  care  is  improving,  albeit  from 
a relatively  low  level.  Despite  some  reduction 
achieved  over  the  last  five  years,  the  rate  of 
premature  deaths (22)  remains  high  almost  double 
the  EU  average.  Deaths  due  to  cardiovascular 
diseases  and  cancer  remain  the  main  causes  of 
mortality,  accounting  for  45 %  and  26 %  of  all 
deaths  in  2015.  While  quality  of  acute  care  for 
registered  some 
cardiovascular  diseases  has 
developments  over  the  past  years,  cancer  survival 
and screening rates have improved only marginally 
and remain below the EU average. (23) 

Disease  prevention  and  public  health  show 
some weaknesses. Estimates show that 37% of the 
total  burden  of  disease  in  Slovakia  in  2017  was 

(22)  Amenable mortality is defined as premature deaths (under 
age 75) that could be avoided with effective healthcare. 
(23)  In an effort to lower the cancer incidence and mortality, the 
government approved a national cancer plan in 2018. 

21 

6,63,43,32,610,36,05,75,0024681012Bratislava RegionEastern SlovakiaCentral SlovakiaWestern Slovakiaper 1000 populationNurses and midwivesDoctors 
 
                                                           
3.1. Public finances and taxation 

attributable to lifestyle-related risk factors (IHME, 
2017). The lack of effective coordination between 
care  sectors,  as  well  as  a significant  decrease  in 
prevention  spending  in  the  past  years,  negatively 
affected  the  impact  of  existing  health  promotion 
programmes. 

22 

 
3.2.  FINANCIAL SECTOR 

Banking sector 

(consumer  and  housing)  continue 

Slovakia’s  small  banking  sector  performs  well 
but  fast-growing  private 
indebtedness  may 
threaten  future  prospects.  There  are  25  banks 
operating in the country and  together they control 
close  to 70 % of the total financial assets. Half of 
these  are  controlled  by  3  major  players.  Retail 
to 
loans 
dominate the credit market, and have been growing 
faster than corporate loans in the first half of 2018 
(11.2 %  year-on-year  vs  5.4 %  year-on-year).  In 
the  same  period,  Slovakia  recorded  one  of  the 
fastest  credit  growth  rates  in  the  non-financial 
private  sector  in  the  EU.  The  rapid  growth  of 
household  indebtedness  in  particular  was  also 
identified  by  the  National  Bank  of  Slovakia  as  a 
potential risk to the stability of the financial sector. 

Financial  indicators  remain  sound  while  bank 
profitability has dropped to around EU average 
levels.  The  overall  banking  sector’s  return  on 
equity stood at 5.9 % in 2017. Having historically 
stood  above  EU  and  euro  area  averages,  it  has 
trended  downwards  in  the  recent  period  towards 
these  levels  (of  5.8 %  and  5.7 %,  respectively). 
Rising  wages  in  the  banking  sector,  low  interest 
rates  and  the  special  bank  levy  have  resulted  in 
higher  operational  costs  and  reduced  revenues. 
This  translated  into  a  cost-to-income  ratio  very 
close  to  EU  and  euro  area  averages.  Interest  rates 
play  a  particularly  important  role  in  shaping 
profits.  According 
the 
National Bank of Slovakia, a drop of 0.1 % in net 
interest margin implies a decline of around 10 % in 
banks’  net  profits.  Profits  are  also  squeezed 
through  Slovakia’s  maturing  and 
increasingly 
saturated  credit  market,  as  lending  expansion  and 
rate-cutting  are  no  longer  viable  options.  Banks 
may  therefore  have  to  find  new  ways  to  maintain 
margins, e.g. by investing in new technologies. 

to  data  produced  by 

Aggregate  credit  quality  appears  to  be  good as 
the  non-performing 
loans  ratio  has  been 
steadily  declining.  Amidst  a  low  credit  cost 
environment,  supported  by  a  well-performing 
labour  market,  the  ratio  of  non-performing  loans 
fell to 3.8 % in Q2 2018, one of the lowest in the 
EU (3.6 % in EU). The ratio of performing to non-
performing forborne loans improved slightly in the 
recent  period,  which  could  be  an  indication  that 
banks 
accommodating 
conditions  when  renegotiating  terms.  Looking 

offering  more 

are 

ahead,  the  swift  expansion  of  banks’  balance 
sheets increases the absolute level of financial risk, 
even  in  the  absence  of  deterioration  in  credit 
quality. This could pose a particular challenge  for 
the  banks  which  saw  a  reduction  of  their  highest-
quality  (equity)  components 
their  capital 
structures. 

in 

Graph 3.2.1:  SK Banks return on equity 

Source: Eurostat, ECFIN calculations 

Graph 3.2.2:  NPL and performing forborne loans 

Source: Eurostat, ECFIN calculations 

The  National  Bank  of  Slovakia  took  steps  to 
slow  the  growth  in  the  debt  of  household  and 
non-financial corporations. Starting in July 2018, 
an  amendment  to  the  National  Bank  of  Slovakia 
decree 10/2016 entered into force, limiting the new 

23 

-6-4-202468101220072008200920102011201220132014201520162017Return on Equity, %Return on Equity (%)EU (changing composition)Euro Area (changing composition)0123456716Q116Q216Q316Q417Q117Q217Q317Q418Q118Q2Performing foreborne loansNon-performing foreborne loansNon-foreborne NPLs% of total loans and advances% of total loans and advances 
 
 
 
 
3.2. Financial sector 

The estimated valuation gap for  housing prices 
in  Slovakia  is  close  to  zero.  According  to 
Commission calculations, the alternative valuation 
metrics  suggest  no  significant  overvaluation 
imbalances  and  the  growth  rates  recorded  in  the 
past  years  appear  sustainable.  In  particular,  price-
to-income measures do not point to an overheating 
housing  market.  Affordability  remained  stretched 
in  2017,  with  an  average  of  9.5  years  of  income 
needed  for  the  acquisition  of  100 m2,  which  is 
broadly in line with the long-term average. 

Graph 3.2.4:  Valuation Gap 

mortgage  loans loan-to-value ratio to 90 %, down 
from  100  %  previously.  Further  restrictions  were 
also  introduced  to  limit  the  proportion  of  new 
loans  with  a  ratio>  80  %  to  under  30  %  of  total 
new  loans  (down  from  40  %  and  >  90  % 
previously)  as  well  as  to  the  maximum  indicative 
debt-to-income  levels.  These  thresholds  will  be 
further  tightened  in  2019  and  are  likely  to  have 
contributed  to  the  moderation  in  house  price 
growth  in  the  second  half  of  2018.  Additional 
measures  were  taken  by  the  National  Bank  of 
Slovakia  in  relation  to  the  minimum  mandatory 
capital buffers for the five largest banks operating 
in  Slovakia,  effective  from  January  2018.  As 
Slovakia’s banks are well-capitalised, fulfilling the 
minimum requirements for own funds (capital) and 
considered 
eligible 
unproblematic in current, liquid market conditions. 

liabilities 

generally 

is 

Housing market 

Similar  to  other  Central  and  East  European 
countries,  housing  prices  continue  to  rise.  In 
Q3 2018,  residential  property  prices  (on  average 
EUR  1433/  m2)  surpassed  their  previous  peak  of 
Q2 2008. In 2018 house price  inflation  moderated 
from 4.8 % year-on-year in Q1 to just 4.0 % in Q3, 
a  virtually  unchanged  level  from  the  previous 
quarter.  Prices  are  heavily  skewed  towards  the 
Bratislava  area  where  the  average  price  /  m2  is 
EUR  2000,  almost  double  compared  to  the  next 
most expensive regions, Trnava and Košice. 

Graph 3.2.3:  House price to income ratio 

Source: Eurostat, ECFIN calculations 

Source: Eurostat, ECFIN calculations 

Demand  for  housing  is  fuelled  by  a  positive 
economic climate, but also a lack of alternative 
housing  options.  Slovakia  ranks  very  high  in  EU 
in  the  share  of  young  people  (aged  25-34)  still 
living with their parents (57 % v the EU average of 
28 %;  Eurostat,  2019)  and  in  the  high  number  of 
persons  sharing  rooms.  Slovaks  also  leave  their 
parents’ house at the age of 31 on average, putting 
them  among  the  latest  in  the  EU.  The  thin  rental 
market  means  that  young  people  often  struggle  to 
move to rented accommodation as an intermediate 
step  towards  home  ownership  (see  chapter  3.3). 
Less  than  9 %  of  the  population  rents  at  market 
prices, usually in Bratislava and a few other cities. 
The  lack  of  property  for  rent  keeps  the  cost  of 
renting  high  (in  some  cases  even  higher  than  the 
cost  of  ownership),  while  also  limiting  labour 
mobility.  Lower  income  groups  are  particularly 
hard-hit,  being  priced  out  of  the  rental  and 
ownership  market,  while  also  suffering  from  a 
shortage of social housing in major cities. Housing 

24 

57911131517200020012002200320042005200620072008200920102011201220132014201520162017Years of income necessary to buy an assumed 100m2 dwellingSlovakiaCzech RepublicPolandHungaryBEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISEUK-4-2024681012-40-200204060Deflated house price growth, 2017 (%)Estimated valuation gap, 2017 (%) 
 
 
3.2. Financial sector 

appear to have responded to rising house prices by 
extending  mortgage  maturities,  as  during  2017 
63 %  of  mortgages  were 
issued  at  30-year 
maturities (the permitted maximum), up from 54 % 
in 2016. 

Graph 3.2.5:  Debt / GDP, Households 

infrastructure  available  for  social  housing  is  a 
prerequisite for effective roll-out of social policies. 

Household debt 

economic 

favourable 

Household  debt  continues  to  rise  and  poses  a 
potential  risk  to  the  stability  of  the  banking 
outlook, 
sector.  A 
historically  low  interest  rates,  high  employment 
and  rising  wages  have  encouraged  households  to 
take  on  increasing  amounts  of  debt.  However, 
households’ disposable income did not rise as fast 
as  GDP  or  wages  over  the  past  10  years  (2008-
2017  average  GDP  growth  2.5 %,  wages  3.1 %, 
disposable  income  1.6 %).    Slovakia  recorded  the 
highest growth in terms of household debt to GDP 
in 2017 and the  first  half of 2018 in the EU. This 
debt mostly consists of mortgage loans, associated 
with a culture of  home ownership. Slovakia ranks 
very  high  in  the  EU  in  terms  of  people  living  in 
owned  dwellings  (90.1 %  versus  70 %  and  66 % 
and  euro  area  averages).  All  these  were  major 
contributing factors to the accumulation of debt. 

Source: Eurostat / ECFIN calculations 

Intermediaries such as mortgage brokers play a 
major  part 
in  keeping  the  flow  of  new 
mortgages  high.  Around  60 %  of  new  mortgages 
are arranged via brokers, whose earnings consist of 
commissions  earned  upon  the  signing  of  a  new 
borrowing  agreement.  While  brokerage  activities 
have  helped  to  create  more  liquid  mortgage 
markets, they  have also contributed to households 
regularly  re-financing  their  mortgages  at  lower 
rates  while  leaving  debt  service  costs  typically 
unchanged.  This  in  turn  has  eroded  financial 
buffers for households in the  event of interest rate 
increases, and the reliance of banks on brokers has 
driven down banks’ lending margins. 

Higher  household  savings  can  create  financial 
buffers  to  cope  with  rising  debt  service  costs. 
Looking  ahead,  potential  rising  interest  rates  will 
pose  a  double  risk  to  households.  First,  the  debt 
service effort will increase and squeeze household 
finances. Second, some households may no longer 
qualify  for  mortgage  loans  on  the  basis  of  the 
macro-prudential  rules  in  force,  which  may  cause 
them  to  substitute  mortgage  financing  with  more 
expensive  consumer  loans.  The  impact  of  rising 
interest  rates  is  enhanced  by  the  generally  long 
terms  of  existing  mortgage  and  consumer  loans 
(more  than  26  years  on  average  for  housing  and 
seven  years  for  consumer  loans).  Households 

25 

0,05,010,015,020,025,030,035,040,045,0200020012002200320042005200620072008200920102011201220132014201520162017Household Debt as % of GDP SlovakiaCzech RepublicPolandHungarySlovakia 
 
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

Labour market 

Strong  economic  growth  has  led  to  significant 
labour  market  improvements  but  structural 
rate 
challenges  persist.  The  unemployment 
reached a new historical low of 6.1 % in Q4-2018 
(seasonally adjusted). Supported by the creation of 
around 50 000 new jobs compared to Q3-2017, the 
employment  rate  (20-64)  increased  to  72.5 %  in 
Q3-2018  and  wages  continued  to  grow  at  a  fast 
important 
pace.  Despite 
regional  and  gender  disparities 
terms  of 
employment  levels  and  job  vacancies  persist.  The 
unemployment  rate  remains  relatively  higher  in 
three regions of southern and eastern Slovakia.  

improvements, 
in 

these 

Graph 3.3.1:  Unemployment rate by regions December 

2018 

Source: Central Office of Labour, Social Affairs and Family 

Demographic 
trends  and  new  production 
processes will have an important impact on the 
labour  market.  While  the  population  is  set  to 
decline across the country in the long term (2035), 
it is forecasted to decrease the most in the regions 
that are already facing labour shortages (except for 
Bratislava).  It  is  also  estimated  that  33 %  of  all 
jobs  in  Slovakia  are  highly  automatable  and 
another 31 % are at risk of a substantial change in 

how 
they  are  carried  out  (OECD,  2018a). 
Cumulatively, these estimates indicate that close to 
two  thirds  of  jobs  are  at  risk,  the  highest  rate 
among  Organisation  for  Economic  Co-operation 
and  Development  countries.  Automation  can  also 
contribute  to  the  creation  of  new  jobs.  This 
requires  sizeable  investment  in  adapting  to  new 
labour  market  demands  requiring  new  and  more 
advanced 
types  of  skills  and  competences 
(European  Commission,  2018g).  Currently,  only 
33% of Slovaks have above basic digital skills. 

is 

the 

required 

increasing. 
The  number  of  vacancies 
Employers report increasing  difficulties in finding 
workers  with 
qualifications. 
Vacancies  registered  at  the  public  employment 
services  confirm  this  increasing  trend.  Over  the 
past  two  years  the  number  of  vacancies  doubled 
and  reached  84 000  in  September  2018.  In  2017, 
the bulk of vacancies are concentrated in the public 
administration  (22.6 %),  manufacturing  (16.3 %), 
trade  (8.9 %)  and  transports  (8.7 %).  Job  vacancy 
ratios  differ  significantly  among  regions,  with  a 
clear  negative  correlation  with  the  unemployment 
rate  (Graph  3.3.1).  The  ratio  ranged  from  1.25  in 
Bratislava to only 0.13, on average, in the regions 
of  Banská  Bystrica,  Prešov  and  Košice 
in 
December 2017. 

Growing  labour  demand  attracted  significant 
numbers  of  migrant  workers.  In  September 
2018,  there  were  65 000  foreigners  working  in 
Slovakia, a 40 % increase from 2017. Since 2016, 
immigration  has  been  dominated  by  non-EU 
nationals,  notably  from  Serbia  and  Ukraine,  who 
now  constitute  approximately  half  of  all  foreign 
workers (Ministry of Finance, 2018g). As of May 
2018,  Slovakia  has  relaxed  requirements  for 
employing  migrants 
countries, 
introducing  a  simplified  procedure  for  filling 
designated 
districts  with 
jobs 
unemployment levels below 5% (up to a maximum 
of  30 %  of  employees  per  enterprise).  The  inflow 
of  foreign  workers  is  unlikely  to  fully  meet  the 
growing  demand  for  labour,  which  signifies  the 
importance  of  addressing  domestic  barriers  to 
higher labour market participation. 

scarce 

from 

third 

in 

26 

2,622,312,933,124,047,038,618,17207981364910390683371984637534150440500010000150002000025000012345678910Job vacany in totalUnemployment rate in %Unemployment rateAvrg. Unemployment rateJob Vacancy 
 
 
 
3.3. Labour market, education and social policies 

Box 3.3.1: Monitoring performance in light of the European Pillar of Social Rights 

The European Pillar of Social Rights is designed as a compass for a renewed process of upward convergence 
towards better working and living conditions in the European Union.1 It sets out twenty essential principles 
and rights in the areas of equal opportunities and access to the labour market; fair working conditions; and 
social protection and inclusion.  

Slovakia  faces  some  challenges  on  the  indicators  of  the  Social  Scoreboard  supporting  the  European 
Pillar of Social Rights. The long-term unemployment rate remains high despite improvements. The impact 
of  social  transfers  on  poverty  reduction  deteriorated  and  the  early  school  leaving  is  on  the  rise.  On  the 
positive side, income inequality and the share of people at risk of poverty or social exclusion remain low, 
while  both  employment  and  unemployment  rates  are  improving  at  a  fast  pace.  Access  to  public  services, 
including healthcare, is difficult in particular in some regions, thereby negatively affecting social inclusion 
of disadvantaged groups. 

The  enrolment  in  early  childhood  education  and  care 
remains  very  low.  Less  than  2 %  of  children  under  the 
age  of  3  are  in  formal  childcare,  compared  to  the  EU 
average of 33 % as highlighted by the Social Scoreboard. 
This  is  mostly  driven  by  generous  maternity  leave 
conditions  and  also 
insufficient  availability  of 
childcare  services.  In  the  school  year  2017/2018,  there 
was  a  significant  surplus  in  demand  for  places  in 
kindergartens,  with  7.7  rejected  applications  per  100 
enrolments.  The  situation  was  particularly  critical  in  the 
two biggest cities Bratislava and Košice, where the refusal 
rate was 27 % and 12 % respectively (IFP 2018). 

the 

A  dual  vocational  education  and  training  scheme  was 
introduced  in  2015.  It  aimed  at  making  vocational 
education  and  training  more  relevant  to  the  needs  of 
companies and more attractive to learners. However, while 
the  scheme  attracted  a  significant  attention  of  employers, 
the  interest  of  young  learners  remained  moderate.  An 
additional 2018 amendment lifted remuneration ceiling for 
recognising  only 
learners’  productive  work,  while 
remuneration  up  to  100 %  of  minimum  wage  as  tax 
deductible.  It  abolished  the  disincentives  for  schools  to 
enter  dual  vocational  education  and  training  by  ensuring 
full  per  capita  funding  for  participating  institutions. 
Finally, it harmonised curricula for dual learners and non-
dual  learners  receiving  the  same  qualification.  These 
changes  have  led  to  a  quadruple  increase  in  new  enrolments  of  apprentices,  from  422  in  the  school  year 
2015/2016 to 1 615 in the school year 2018/2019.  

1 The European Pillar of Social Rights was proclaimed on 17 November 2017 by the European Parliament, the Council and 
the  European  Commission:  https://ec.europa.eu/commission/priorities/deeper-and-fairer-economic-and-monetary-
union/european-pillar-social-rights/european-pillar-social-rights-20-principles_en 

Long-term  unemployment  remains  a  serious 
challenge. The long-term unemployment rate (as a 
share  of  the  active  population)  decreased  by  1  pp 
(y-o-y)  to  4.0 %  (109 000  people)  in  Q3-2018, 
well  above  the  EU  average  of  2.9%.  The  average 
duration of unemployment was among the highest 
in the EU. A 60 % share of long-term unemployed 

all 

signals 

unemployed 

among 
structural 
challenges  related  in  particular  to  educational 
attainment, low intra-country mobility and regional 
differences in job opportunities. In 2017, 23.1 % of 
the low-skilled were without a job for more than a 
year, compared to 4.6 % of the medium-skilled and 
1.7 % of the high-skilled. Almost 60 % of the low-

27 

 
 
3.3. Labour market, education and social policies 

Graph 3.3.2:  Link between unemployment rate (% x axis, 

Q1-2017) and share of Roma population (%, y 
axis) 

Source: Institute for Economic and Social reforms based on 
data by the Central Office of Labour, Social Affairs and 
Family, and the Atlas of Roma Communities 2013 and the  

The  gender  employment  gap  is  decreasing  but 
the employment rate of women of childbearing 
age  is  not  improving.  The  gender  employment 
gap decreased by 1.4 pps. to 12.8 % in 2017, above 
the EU average of 11.5 %. This improvement was 
mainly  driven  by  the  higher  employment  rate  of 
women  aged  45+.  By  contrast,  the  employment 
rate  of  women  aged  25-34  years  decreased, 
contributing to widening the gap for this age group 
which  is  above  20  pps  (Graph  3.3.3).  The  overall 
gender  pay  gap  of  19 %  is  above  the  EU  average 
(16.2 %).  The  very  low  enrolment  rate  of  young 
children  in  childcare,  the  low  uptake  of  flexible 
working  arrangements  and 
limited  measures 
supporting  female  entrepreneurs  are  contributing 
factors. 

skilled  long-term  unemployed  are  under  29  years 
of age, reflecting increasing school drop-out rates. 
Three  quarters  of  the  long-term  unemployed  are 
concentrated  in  three  regions:  Prešov,  Košice  and 
Banská Bystrica. 

The 
in 
share  of  young  people  neither 
employment  nor  in  education  and  training  is 
decreasing albeit from a high level. In 2017, the 
rate  (age  group  15-29)  was  16 %,  above  the  EU 
average of 13.4%. The rate for the age group 15-24 
decreased  to  11 %  in  Q2-2018,  slightly  above  the 
EU average of 10.5 %. Youth unemployment (age 
15-24)  decreased  at  a  faster  pace  (by  4  pps  year-
on-year)  and  was  14.2 %  in  Q4-2018,  now  below 
the EU average. The Youth Employment Initiative 
contributed  to  the  positive  trend.  By  end  of 
October 2018, it provided activities for  more than 
48 000 young people, with two thirds thereof then 
training  or 
continuing 
in  other  educational, 
continued 
employment 
investment in this area remains important. 

activities.  Therefore, 

The  situation  of  Roma  people  in  the  labour 
market  is  particularly  weak.  The  Roma,  living 
predominantly in rural areas, are estimated to make 
up  close  to  8  %  of  the  total  population  (UNDP, 
2014), with about half living in marginalised Roma 
communities.  There  is  a  correlation  at  a  district 
level  between  the  share  of  Roma  in  the  total 
population  and  the  unemployment  rate  (Graph 
3.3.2).  In  2016,  the  unemployment  rate  among 
Roma  was  estimated  at  48 %,  with  only  around 
25 % of Roma aged 20-64 being engaged in ‘paid 
work’  (FRA,  2016).  The  situation 
is  more 
challenging among the inhabitants of marginalised 
Roma  communities,  for  whom  the  employment 
rate  was  20.7 %  (16 %  for  women  and  26 %  for 
men).  Employment  levels  are  volatile,  with  a 
dominance  of  temporary  contracts  and  seasonal 
works 
(Ministry  of  Finance,  2018b).  An 
inclusive  education  system  and 
insufficiently 
discrimination  in  the  labour  market  (FRA,  2016) 
contribute to the ethnic segmentation of the labour 
market  and  the  adverse  employment  outcomes  of 
the Roma population. 

28 

-505101520253035051015202530 
 
3.3. Labour market, education and social policies 

not include  an upskilling component.  By contrast, 
training  and  learning  measures  remain  marginally 
used, requiring further investment. 

The  targeting  of  active  labour  market  policies 
to 
the  disadvantaged  groups  remains  a 
challenge. Research, such as the Value for Money 
analysis of the public employment system in 2016 
or the ex-post evaluation (KPMG, 2018), point out 
several  weaknesses.  These  include  the  lack  of  a 
targeted  approach  to  the  low-skilled,  in  particular 
the  marginalised  Roma  communities,  who  are 
instead typically included in public works schemes 
with  low  transition  rates  to  the  primary  labour 
market.  There  is  also  a  lack  of  early  intervention 
systems  and  profiling  remains  basic.  Few  non-
governmental  providers  are  involved  in  active 
labour market policy provision.  

The  implementation  of  the  Action  Plan  for  the 
Integration  of  the  Long-Term  Unemployed  is 
progressing.  Single  points  of  contact  were 
strengthened at all Labour Offices. Job integration 
agreements  were  introduced,  covering,  among 
education 
others,  professional 
activities  and  social  counselling.  By  September 
2018,  61 500  long-term  unemployed  had  signed 
the  agreement.  The  Action  Plan  was  adopted  in 
November  2016  for  a  period  of  two  years,  but 
investment in this group remains a priority. 

reorientation, 

Adult learning is below the EU average. In 2017, 
only 3.4 % of adults received formal or non-formal 
education  and  training,  one  of  the  lowest  rates  in 
the EU (EU average of 10.9 %). (25) Adult learning 
was  mainly  supported  within  the  framework  of 
active labour market policies and relied heavily on 
EU funding (70 % of its total funding in 2015). 

social 

sector 

economy 

The 
remains 
underdeveloped  but  measures  have  been  taken 
to  stimulate  its  growth.  In  2017,  only  2.1 %  of 
the working population was employed in the social 
economy  sector,  well  below  the  EU  average  of 
6.8 %.  Important  persisting  barriers  include:  a) 
lack  of  financial  capital  and  of  entrepreneurial 
skills  in  the  population;  b)  weak  coordination  of 
the policy  with the public employment service;  c) 

(25)  As  confirmed by  the  results  of the benchmarking exercise 
in the area of adult learning and skills conducted within the 
Employment  Committee,  see  the  draft  Joint  Employment 
Report 2019. 

Graph 3.3.3:  Employment rates by age group and sex, 2017 

Source: Eurostat 

New  measures  have  been  adopted  to  support 
female  labour  market  participation.  A  new 
legislative  framework  for  childcare  entered  into 
force  in  January  2018.  It  has  extended  access  to 
childcare to unemployed parents, on the condition 
that  their  child  does  not  take  the  place  of  a  child 
whose  parents  are  employed  or  in  education. 
Slovakia has committed to use EU funds in 2014-
2020  to  build  or  renovate  500  childcare  facilities, 
with  a  focus  on  access  to  childcare  for  the 
marginalised  Roma.(24)  The  construction  of  these 
facilities  is  on-going  but  more  investment  is 
necessary to address the unmet demand. 

Labour market policy 

in  2017.  Their 

Spending  on  active  labour  market  policies  is 
among  the  lowest  in  the  EU.  Public  expenditure 
on active labour market policies stood at 0.2 % of 
GDP 
implementation  reflects 
existing  regional  disparities,  with  62%  of  the 
job 
budget  and  66%  of  all  corresponding 
placements  targeted  at  the  three  regions  with  the 
highest 
Employment 
incentives,  mostly through job subsidies,  were the 
dominant  active  labour  market  policy  measure 
(84%  of  the  budget).  A  quarter  of  the  budget 
targeted  people  with  disabilities.  In  addition, 
significant  financial  resources  were  spent  on 
activation works (public work schemes), which do 

unemployment 

rate. 

(24)  Based  on  indicators  outlined  in  the  Human  resources 
regional 

Integrated 

the 

operational  programme  and 
operational programme. 

29 

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

October  2018, 
from 
among others, the healthcare, education and police 
sectors.  

representing  employees 

Social inclusion and poverty reduction 

On  the  back  of  strong  economic  growth, 
poverty has further declined but strong regional 
disparities persist. In 2017, the share of people at 
risk  of  poverty  or  social  exclusion  fell  further  to 
16.3 %  (856 200  inhabitants),  significantly  below 
the EU average of 22.4 %. A relatively higher rate 
is  reported  for  children  aged  below  16  years 
(22.2 %). Despite the strong economic growth, the 
in-work  poverty  rate  remains  unchanged  (at  6.3% 
of the total working population compared to 6.2% 
in  2012).  Poverty  is  considerably  higher  in  a 
number  of  districts  in  Southern  and  Eastern 
Slovakia,  most notably those  with a  large  number 
of 
in  marginalised  Roma 
communities,  with  a  high  proportion  of  small 
municipalities 
elderly 
population, with a high proportion of poor youth or 
with  high  levels  of  in-work  poverty  (see  Graph 
3.3.4).  This  suggests  the  need  for  dedicated 
investment,  including  in  food  and  basic  material 
assistance.  In  addition,  the  poverty  risk  of  those 
who live  in quasi-jobless  households continued  to 
increase,  reaching  79.9 %,  in  2017,  significantly 
above the EU average. 

prevailingly 

people 

living 

with 

Weaknesses  in  social  safety  nets  and  social 
protection persist. The adequacy of the minimum 
income benefits is below the EU average. (26) The 
overall improvement of the labour market has also 
contributed to a decline in the number of minimum 
income support recipients. In 2017, the number of 
recipients  of  minimum  income  support  further 
decreased  to  a  monthly  average  of  87 727  (by 
16.9 %  compared  to  2016)  of  which  57 725  were 
registered  with  the  Labour  Office,  receiving  an 
average  monthly  benefit  of  EUR 134.62.  Around 
70  %  of  people  at  risk  of  poverty  did  not  have 
access  to  the  minimum  income  benefit  in  2017 
(Ministry of Finance et al. 2018f). Housing support 
benefit  is  particularly  low  (EUR 89  for  two  or 
more  family  members),  and  covers  only  marginal 
part  of  real  housing  costs  in  the  tight  Slovak 

(26)  According  to  the  benchmarking  exercise  in  the  area  of 
minimum  income  schemes  conducted  within  the  Social 
Protection  Committee,  see  the  draft  Joint  Employment 
Report 2019. 

insufficient  inclusion  of  social  aspects  in  public 
procurement  procedures;  and  d)  limited  access  to 
decent  housing.  In  the  disadvantaged  regions, 
social  enterprises  also  struggle  with  the  low 
purchasing power of the local population (Škobla, 
D.  et  al.2018).  The  March  2018  Social  Economy 
and Social Entrepreneurship  Act  laid down a  new 
legal  framework,  which  should  allow  for  more 
investment in this sector. 

the  homeless, 

Facilitated  access  to  personal  bankruptcy  is 
bringing  positive  results.  The  risk  of  earnings 
becoming  subject  to  seizure  proceedings  deters 
those in debt from the labour market, consequently 
further  marginalising 
long-term 
unemployed and Roma. The revision of the Act on 
Bankruptcy  and  Restructuring  implemented  in  the 
course  of  2017  and  2018  facilitated  personal 
bankruptcy  proceedings.  During  the  first  eight 
months of 2018, there were 71 % more debt relief 
actions than during the whole of 2017. Applicants 
are  assisted  by  the  Centres  for  legal  assistance, 
Justice.  Addressing 
under 
indebtedness 
tackling 
undeclared  work,  which  is  estimated  to  be  higher 
than  the  EU  average:  13.4 %  of  total  labour  input 
is  in  the  undeclared  economy.  The  responsibility 
for  addressing  undeclared  work  is  fragmented, 
spread  across  several  Ministries  (Platform  for 
undeclared  work  2018).  The  minimum  wage  has 
been increased to EUR 520 (up from EUR 480) as 
of January 2019 which may stimulate the transition 
towards declared work.  

the  Ministry  of 

is  also 

relevant 

for 

Social dialogue 

of 

social 

Tripartite  social  dialogue  performs  relatively 
well, but the limited capacity of social partners 
is  of  concern.  Social  partners  continue  to  be 
relatively  well  involved  in  the  design  of  labour 
market  measures  and  policies.  However, 
the 
partners’ 
Slovak 
membership 
organisations continues to be among the lowest in 
the  EU  (OECD;  J.  Visser,  2016).  Analytical 
capacity  may  be  limited  and  capacity  building  is 
not  a  formal  government  commitment.  Instead,  it 
depends entirely on project-based support from the 
European  Social  Fund.  There  were  also  some 
structural  changes  concerning  social  partners’ 
organisations.  In  August  2018,  the  Association  of 
Industrial  Unions  became  a  new  member  of  the 
tripartite  Economic  and  Social  Council.  A  new 
Joint  Slovak  Trade  Union  was  established  in 

30 

 
                                                           
3.3. Labour market, education and social policies 

housing market.. In addition, the eligibility criteria 
for receiving unemployment benefits remain strict, 
despite some loosening in 2018. (27) This translates 
into  relatively  low  coverage  of  the  short-term 
unemployed by unemployment benefits.  

Graph 3.3.4:  Regions of poverty 

In  EU  terms,  the  elderly  face  a  low  risk  of 
poverty  or  social  exclusion.  The  at-risk-of-
poverty and social exclusion rate for persons aged 
65+  was  12.1 %  in  2017,  significantly  lower  than 
the EU average of 18.2 %. However, older people 
tend  to  spend  a  larger  part  of  their  income  on 
heating  bills  and  are  more  often  in  homes  with 
inadequate heating (European Commission, 2018). 
A  minimum  pension  was  introduced  in  2015  but 
only  for  those  with  at  least  30  qualified  years  of 
insurance. More than 70 % of those self-employed 
pay  old-age  contributions  from 
the  so-called 
minimum  assessment  base.  This  can  have  a 
negative impact on the adequacy of their pensions. 

While  demand  for  long-term  care  is  growing, 
limited.  Public 
service  provision  remains 
expenditure  on  long-term  care  in  2016  was  0.9 % 
of  GDP,  considerably  lower  than  the  EU  average 
of 1.6 %. Responsibility is fragmented between the 
social and healthcare  systems, leading to different 
organisations and sources of funding, which pose a 
barrier  to  effective  coordination.  Waiting  lists  for 
places  in  institutions  are  long  and  the  quality  of 
services  is  seen  as  low,  while  costs  of  private 
facilities  are  generally  very  high  (Giorno,  C.  and 
from 
K.  Londáková, 
institutional 
and 
to 
independent  living  is  slow.  As  the  very  old-age 
dependency 
increase 
significantly between now and  2070 (21.7 pps vs. 
the  13.6  pps  EU  average  increase),  significant 
investment  will  be  needed  to  meet  the  rising 
demand for quality long-term care. 

2017c).  Transition 

community-based 

is  projected 

ratio 

care 

to 

Progress  in  moving  from  institutional  care  to 
community-based  support  for  persons  with 
disabilities  is  limited.  The  implementation  of  the 
Convention on Rights of Persons with Disabilities 
is  hampered  by 
the  unclear  division  of 
responsibilities  and  lack  of  cooperation  between 
national,  regional  and  local  administration  levels. 
It  lacks  a  national  strategic  approach,  resulting  in 
limited  guidance  at  national  level  and  lack  of 
exchanges of good practice, low public awareness 
and  insufficient  buy-in  by  the  employees  of 
existing  institutions  (FRA,  2018).  The  use  of  EU 
efficient 
funds, 
essential 
transformation  of 
is 
currently  insufficiently  coordinated  (Cangár,  M. 
and  M.  Machajdíková,  2018).  In  July  2018,  a 
number 
non-governmental 
organisations addressed an open letter to the Prime 

for 
steering 
the  existing 

institutions, 

experts 

and 

an 

of 

Source: Michálek, Madajová, Veselovská 2016 

in  Q2-2018  amounted 

In  spite  of  the  increase,  the  remuneration  of 
social  workers  remains 
low,  reducing  the 
attractiveness  of  the  profession.  The  average 
monthly  gross  wage  of  social  workers  requiring  a 
master’s  degree 
to 
EUR 920,  14 %  more  than  in  2016  (Trexima, 
2018).  By  contrast,  a  graduate  with  a  master’s 
degree earned in Q4-2017 on average EUR 1800 in 
the  private  sector  and  EUR  1194  in  the  public 
sector  (Trexima,  2017).  Earnings  of  field  social 
and  health  workers,  who  often  serve  as  front-line 
officers,  are  even  lower.  Their  average  wage  was 
EUR 726  in  Q2-2018,  below  the  average  of 
EUR 1001 for high school graduates (Q4-2017). In 
addition,  social  work  has  low  societal  recognition 
and attractiveness. These factors negatively impact 
on willingness to apply for vacancies in this sector 
and  result  in  high  shortage  of  social  workers 
(Škobla et al., 2015).  

(27)  A bad performance for unemployment benefits in Slovakia 
is confirmed by the results of the Benchmarking exercise in 
the  area  of  unemployment  benefits  and  active  labour 
the  Employment 
market  policies  conducted  within 
Committee.  See  the  draft  Joint  Employment  Report  2019 
for details. 

31 

 
 
                                                           
3.3. Labour market, education and social policies 

access  to  services.  There  remains  a  need  for 
investment  and  support  for  Roma  marginalised 
communities(28)  to  ensure  access  to  essential 
including  water,  sanitation,  energy, 
services, 
transport  and  other  facilities.  The  Atlas  of  Roma 
Communities  (UNDP,  2014)  is  under  revision, 
mapping  the  existing  infrastructure  and  facilities 
and  developing  a  statistical  survey  of  living 
conditions,  with  data  expected  in  2019.  Large-
scale systematic progress is  hampered by the lack 
of  social  housing.  While  some  improvement  is 
expected  in  response  to  the  non-governmental 
sector  projects  based  on  micro-credits  and  self-
construction,  and  to  a  newly  launched  EU-funded 
call,  further  investment  in  non-segregated  social 
housing is crucial.  

The  health  status  of  marginalised  Roma 
communities is worse than that of the majority 
population. This reflects the lower accessibility of 
life 
healthcare  services  (UNDP,  2014).  The 
expectancy  for  Roma  is  70,  six  years  lower  than 
the  majority  population.  The  infant  mortality  rate 
is  almost  three  times  higher  for  Roma  than  in  the 
majority  population  (12.3  compared  to  4.2  per 
1000  infants,  Ministry  of  Finance,  2018a).  While 
positive  spillovers  have  been  observed  under  the 
EU-funded 
initiative, 
introducing health  mediators, often recruited  from 
Roma  communities,  continuous 
is 
necessary to ensure lasting improvements. 

investment 

‘Healthy 

regions’ 

inflow 

Slovakia 

an 
since 

increasing 
2011, 

of 
Experiencing 
immigrants 
faces 
challenges  to  integrate  them  well.  Foreigners 
concentrate mostly in the regions with the highest 
level  of  labour  shortages.  Approximately  three-
fourth  of  immigrants  reside  in  Slovakia  for  more 
than  three  years  (Ministry  of  Finance  2018c), 
accentuating  the  need  for  effective  investment  in 
long-term integration measures. Challenges persist 
regarding effective access to social and healthcare 
services,  discrimination  in  the  housing  market, 
availability  of  affordable  Slovak  language  classes 

(28)  This includes territorially segregated settlements that often 
lack  connections  to  public  utilities  with  an  estimated 
population  of  74 000  (18.4 %  of  all  Roma  in  Slovakia)  as 
well  as  semi-segregated  settlements  in  the  outskirts  of  a 
municipality  (95 000  inhabitants,  corresponding  to  23.6 % 
of  the  Roma  population)  and  or  within  a  municipality 
(around  46 000  of  inhabitants  and  11.5 %  of  the  Roma 
population) (UNDP, 2014). 

Minister,  pointing  out  the  lack  of  progress  in  the 
implementation of the Convention.  

Deinstitutionalisation  of  substitute  care  for 
children  shows  some  weaknesses  and  is  being 
reformed.  At  the  end  of  2017,  there  were  around 
14 000  children  in  substitute  care,  37 %  thereof 
placed in institutional care  with an average length 
of stay in a children's home slightly above 4 years. 
The  most  common  reason  for  intervention  is  the 
lack of housing security. Existing institutional care 
remains  under-resourced  in  terms  of  sufficiently 
trained  and  remunerated  staff.  This  is  a  barrier  to 
the efficient provision of an individual approach to 
children  and  their  families  (Fico,  2017).  The 
amendment  of  the  Act  on  Social  and  Legal 
Protection  of  Children  and  Social  Curatorship,  in 
force as of April 2018, is an important reform step 
to  improve  prevention  measures  to  avoid  placing 
children in substitute care. However, there is still a 
lack  of  a  monitoring  and  evaluation  system  to 
assess 
interventions.  The 
prevention of long-term placement of children with 
disabilities 
require 
dedicated follow-up investment. 

institutional  care  will 

the  efficiency  of 

in 

Social  housing  remains  underdeveloped.  The 
low availability of rental/social housing negatively 
affects the effectiveness of social policies aimed at 
socially  disadvantaged  or  excluded  persons  and 
persons  with  disabilities,  and  will 
require 
significant  investment.  For  certain  groups,  the 
provision  of  social  housing  support  would  bring 
economies  to  public  budgets.  This  is  in  particular 
the case of families or single mothers with children 
in  institutional  care,  where  re-unification  of  the 
family by providing adequate social housing would 
be  less  costly  than  keeping  children  in  care  (G. 
lack  of 
Csomor,  2017).  In  addition 
infrastructure, 
the 
government 
and  prevent 
homelessness,  and  the  responsibilities  stay  mostly 
with the  municipalities. The lack of a  coordinated 
approach even leads to cases of facilities allowing 
24-hour  stay  being  turned  into  night  shelters,  just 
because  the  latter  have  more  stable  access  to 
finance  through  the  Ministry  of  Labour.  The 
concepts  of  homelessness  or  inadequate  housing 
situation  are  also  very  vaguely  defined  in  the 
legislation. 

to 
is  no  strategy  at 

reduce 

there 

level 

the 

to 

The  living  conditions  in  marginalised  Roma 
communities are often hampered by the lack of 

32 

 
                                                           
3.3. Labour market, education and social policies 

and  lack  of  coordination  among  central  and  local 
levels (Plavnická, J. and D. Šlosár, 2017). 

Education and skills 

to 

Educational  outcomes  are  weak  and  worsening 
and  reveal  significant  regional  and  socio-
the 
disparities.  According 
economic 
Programme  for  International  Student  Assessment 
(PISA) survey, the proportion of underachievers is 
significantly  higher  than  the  EU  average  in  all 
tested  sectors  –  reading,  mathematics  and  science 
(OECD,  2016).  National  tests  in  primary  schools 
indicated large differences in  outcomes  within the 
country;  the  worst  results  were  recorded  in  the 
regions  of  Košice,  Prešov  and  Banská  Bystrica, 
while  students  from  Bratislava  scored  the  highest 
(NUCEM,  2017).  The  scores  of  students  from 
disadvantaged groups  were half as high compared 
to their peers (Ministry of Education, 2018).  

Spending  on  education  remains  low  and  is 
reflected  in  low  teachers’  salaries  and  poor 
learning  equipment  —  including  for  digital 
skills.  As  a  share  of  GDP,  spending  on  education 
decreased  from  4.1%  in  2014  to  3.8%  in  2016 
because  public  expenditure  failed  to  keep  pace 
with brisk growth in the wider economy. Spending 
on  education  measured  against  the  total  public 
budget  amounted  to  9.3 %  compared  to  the  EU 
average of 10.2 % in 2016.  

and 

students 

‘national  reform  programme 

for 
A  new 
education  and  upbringing’  was  adopted.  The 
much-awaited  reform  programme  and  related 
action  plan  for  2018-2019,  adopted  in  June  2018, 
proposed  changes  related  to  the  inclusion  of 
strengthening 
disadvantaged 
educational  outcomes.  The  strategy  is  based  on  a 
policy  framework  with  an  estimated  EUR  15 
billion  budget  until  2027,  whereby  EU  funds  are 
expected  to  play  an  important  role.  For  the  next 
two  years  priority  is  to  be  given  to  teachers’ 
salaries,  in  particular  for  young  teachers,  and 
increasing  kindergarten  places.  Measures  are 
planned  to  increase  the  number  of  professional 
staff  in  schools,  reduce  the  administrative  burden 
and  promote  the  use  of  digital  technologies.  It 
remains  to  be  seen  and  closely  monitored  if  the 
planned  measures  produce  the  expected  results, 
however  additional  further  reform  measures  are 
still  needed, 
training  and 
continuing professional development.  

including 

teacher 

faces 

teaching  profession 

The 
increasing 
shortages as prestige, salaries and opportunities 
for  professional  development  remain 
low. 
Despite  gradual  salary  increases,  the  teaching 
profession remains unattractive. Average teachers’ 
salaries lag far behind the average wages for a full-
time  tertiary-educated  worker  in  Slovakia.  Upper 
secondary  teachers  working  in  public  institutions 
earn only 64% of the average salary of a full-time 
full-wage  worker  with  tertiary  education  (OECD, 
2018b).  The  government  has  decided  to  increase 
teacher  salaries  by  10 %  as  of  January  2019  and 
another  10 %  in  2020.  Initial  teacher  education  is 
not  sufficiently  focused  on  preparing  for  practical 
teaching, and continuing professional development 
is  not  sufficiently  relevant  to  teachers’  needs. 
Improvements  in  career  paths  and  continuing 
professional  development  are  under  discussion. 
Investment 
training  and  better 
teachers’ 
equipment for schools remains important.  

in 

There  are  still  many  gaps  in  the  provision  of 
early  childhood  education  and  care.  Slovakia 
ranks  amongst  the  lowest  performing  Member 
States  in  this  area.  In  2016,  the  corresponding 
participation  rate  for  children  aged  4  to  6  was 
76.5 %, well below the EU average of 95.3%, and 
it had decreased compared to 2013, contrary to the 
increasing  trend  in  the  EU.  National  enrolment 
data  also  reveal  a  gap  between  the  west  and  the 
east of Slovakia, with the lowest enrolment rates in 
districts  with 
the  highest  share  of  socially 
disadvantaged  people.  The  participation  of  Roma 
aged 3 to 5 is estimated at only 32% compared to 
81% for the remainder of this age group (Ministry 
of  Finance  et  al.  2018f).  The  2016  government 
manifesto outlined a target of 95 % enrolment  for 
children above the age of 4 by 2020.  

from 

socio-economically 

Early  childhood  education  and  care  is  being 
reformed to increase enrolment in particular of 
children from less well-off families. The number 
of  free  kindergarten  places  increased  to  cover  all 
children 
deprived 
families  from  September  2018.  The  government 
has announced it will lower the age of compulsory 
education to five years-olds as of September 2020. 
This  is  likely  to  have  a  positive  impact  on 
disadvantaged  children.  Ensuring  the  necessary 
investment  and  actual  attendance  and  genuinely 
inclusive  early  childhood  education  and  care 
would maximise the outcomes. 

33 

 
Current measures to foster equity and inclusion 
have  so  far  fallen  short  of  expectations.  It  is 
estimated  that  62 %  of  Roma  children  attend  a 
school  where  all  or  most  other  children  are  also 
Roma  (FRA,  2016)  and  no  real  progress  on  the 
desegregation  was  observed  over  the  recent  past 
(Amnesty International, 2016). In addition, 22.6% 
of Roma children are in special elementary school 
for  pupils  with  special  needs  (Slovak  National 
Centre for Human Rights, 2017), which is a major 
overrepresentation;  94%  of  them  are  in  a  class 
where all or most children are Roma (FRA, 2016). 
In  spite  of  an  amendment  prohibiting  placing 
children  in  special  schools  for  problems  such  as 
dyslexia  or  coming  from  a  socially  disadvantaged 
background,  the  decrease  of  children  in  such 
schools  has  been  small.  (29)  There  are  ongoing 
projects  supporting  inclusive  education,  including 
extra-curricular activities and competences of staff 
in  kindergartens  and  primary  schools  (Eurydice, 
2018).  Implementation  will  be  key  and  these 
projects  need  to  be  thoroughly  evaluated  to  guide 
further  actions  as  investment  gaps  concerning 
inclusive education persist.  

The  increasing  rate  of  early  school  leaving  is  a 
major  concern.  Contrary  to  most  EU  countries, 
the  early  school  leaving  rate  is  increasing:  it  was 
9.1 %  in  2017  versus  4.7 %  in  2010.  Regional 
disparities are high, ranging from 4.7 % in western 
Slovakia  to  14.7 %  in  eastern  Slovakia.  It  is 
estimated  that  58 %  of  Roma  leave  school  early 
(FRA,  2016).  Low  education  attainment  has  a 
critical  impact  on  employment  and  contributes  to 
group differences in employment. 

Skills  mismatches  are  a  barrier  to  growth  and 
education and training are not well aligned with 
labour  market  needs.  In  2016,  up  to  60 %  of 
secondary  and  tertiary  graduates  were,  five  years 
after  graduation,  working  in  jobs  not  fully  in  line 
with  their  fields  of  study.  By  contrast,  only  20 % 
of  secondary  and  25 %  of  tertiary  graduates  were 
working  in  jobs  fully  compatible  with  their  fields 
of study (Trexima, 2017).  

(29)  From  28 331  in  September  2015  to  26 931  in  September 

2017. 

3.3. Labour market, education and social policies 

Graph 3.3.5:  Early Leavers (age 18-24) from education and 

training by NUTS 2 regions 

Source: European Commission 

Tertiary  educational  attainment  is  improving, 
but  its  quality  and  efficiency  show  room  for 
improvement. In 2017, the tertiary graduation rate 
was 34.3 % compared to an EU average of 39.3%; 
this  gap  has  narrowed  by  10  percentage  points 
since  2007.  However,  teaching  quality  is  limited 
and universities display limited internationalisation 
and  job  market  orientation.  In  addition,  the  share 
of  graduates  in  sciences,  technology,  engineering 
and mathematics at 21 % is below the EU average 
of  26 %.  The  development  of  professionally-
oriented  bachelor  degrees  has  been  advocated  by 
the  business  community,  but  such  courses  remain 
scarce.30  High 
among 
secondary  school  graduates  and  tertiary  students 
and  graduates,  in  particular  in  the  medical  and 
technical fields, where 22 % of graduates leave the 
country,  poses  a  challenge 
to  growth.  The 
corresponding  sunk  investment  is  estimated  at 
EUR 45  million  (OECD,  2017b;  Ministry  of 
Finance, 2017).  

outward  migration 

New  legislation  aims  to  improve  quality  in 
higher education. A new law on quality assurance 
in  higher  education  introduces  a  new  independent 
accreditation  system  and  aims  at  rationalising  the 
number  of  universities  and  university  degrees.  It 
creates a new ‘interdisciplinary studies’ bachelor’s 
programme.  Students  will  also  have  an  option  to 
extend  their  fee-free  study  period  by  one  year  if 

(30) A public call was announced in December 2018 that aims to 

support the creation of such programs. 

34 

0.02.04.06.08.010.012.014.016.020102011201220132014201520162017Early leavers rate in %Western SlovakiaCentral SlovakiaEastern SlovakiaSlovakiaEU 
                                                           
 
                                                           
3.3. Labour market, education and social policies 

higher 

they  take  part  in  an  internship  abroad  or  in  the 
Erasmus+ programme (Eurydice, 2018). Measures 
may  contribute  to  improving  quality  and  the 
if 
internationalisation  of 
supported  by  better  accreditation  and  quality 
assurance  measures,  an 
focus  on 
strategic  planning,  and  better  governance  of 
Slovak  higher  education.  To  improve  studying 
conditions, 
the  government  announced  new 
investments  in  student  housing  (EUR 50  million 
over two years) in May 2018. 

education 

increased 

remain. 

training, 

in  a  higher 

Despite  improvements  in  vocational  education 
and 
The 
challenges 
attractiveness of vocational education and training 
is increasing (see Box 3.3.1) but there is scope for 
improving the quality of teaching, in the guidance 
of  counsellors  and 
level  of 
internationalisation.  Teaching  institutions  could 
engage  more  with 
form 
innovation  partnerships,  and  support  the  diffusion 
of  state-of-the-art  technologies  to  boost  relevant 
skill levels. Promoting career options within smart 
specialisation areas requires employers to invest in 
the training of young people and in up-skilling and 
re-skilling 
the  existing  workforce.  Targeted 
support  for  reforming  vocational  education  and 
training  in  the  catching-up  region  of  Prešov  was 
launched in January 2018. 

local  businesses, 

Investment needs 

including 

job  opportunities, 

More  investment  in  skills,  education,  training 
and  social  inclusion  can  improve  Slovakia’s 
productivity  and  generate  inclusive  growth. 
Shortages of skilled labour and changing industrial 
production  patterns  require  investment  in  human 
capital development and adapting the labour force 
to  new 
through 
fostering  digital  and  entrepreneurial  skills  and 
activating  the  unemployed,  particularly  the  long-
the 
term  unemployed.  Investment  can  raise 
performance of the education and training system, 
and improve competitiveness  and social cohesion. 
Using the full labour potential requires investment 
social 
social 
in 
infrastructures, 
in  particular  accessible  social 
housing,  healthcare,  long-term  care  and  childcare, 
with  due  attention 
regional  disparities. 
to 
Investment  is  also  necessary  to  ensure  universal 
access  to  public  utilities  and  services,  notably  for 
segregated Roma communities. 

inclusion 

policies 

and 

35 

 
3.4. COMPETITIVENESS AND INVESTMENT 

3.4.1 Productivity and investment 

Slovakia's  successful  growth  model  faces  new 
challenges.  Slovakia  has  been  one  of  the  most 
successful  Member  States  in  achieving  economic 
convergence  in  the  past  two  decades,  with  real 
GDP  per  person  (in  power  purchasing  standards) 
having risen from 50% of the EU average to 77% 
in  2014,  though  with  no  progress  since.  The 
success  of  the  growth  model  underpinning  its 
economic  development 
industrial 
specialisation  financed  in  part  through  foreign 
direct  investment  and  facilitated  by  low  labour 
costs  and  proximity  to  key  supply  chain  partners 
(Haylat  et  al.,  2018).  In  light  of  growing  labour 
shortages,  upward  pressure  on  unit  labour  costs 
and  potentially  more  muted  growth  prospects  for 
traditional (automotive) manufacturing, re-igniting 
convergence will depend crucially on the country's 
success 
and 
in 
productivity.  

competitiveness 

relied  on 

raising 

Productivity  gains  have  been  at  the  heart  of 
Slovakia’s  convergence  success.  Chart  3.4.1 
shows  a  doubling  in  labour  productivity  levels 
between  2000  and  2017.  This  was  largely  driven 
by capital deepening and technological catch-up. It 
helped  to  substantially  narrow  the  gap  with  the 
EU.  Inter-sectoral  labour  reallocation,  with  an 
annualised  growth  rate  of  1.95%  between  1995-
2015,  was  an  important  channel  of  productivity 
growth (DG ECFIN, 2018c). Allocative efficiency 
gains  —  an  increase  in  aggregate  productivity 
achieved  through  a  more  efficient  allocation  of 
productive resources across economic activities — 
in  Slovakia  were  among  the  strongest  in  the  euro 
area 
their 
2000-2014, 
corresponding  level  above  the  euro  area  average 
(DG ECFIN, 2018b).  

between 

leaving 

integration.  While 

insufficient  diffusion  of 

Slovakia has one of the highest dispersion rates 
of  firm  productivity,  indicating  potential  to 
improve  market 
it  has 
decreased between 2009-2015, high dispersion can 
signal 
technological 
advances.  Large  differences  between  (export-
oriented)  foreign-owned  firms  and  domestic  firms 
may  explain  the  dispersion  observed.  Relative  to 
GDP  per  head,  exporters’  productivity  premiums 
are by far the largest of all EU Member States on 
average  for  2007-2014  (DG  ECFIN,  2018a).  A 
large  productivity  differential  also  exists  between 
small  and  medium-sized  enterprises  and  large 

firms, with the former being much less productive 
in terms of value added per person employed.  

transport 

increase  Slovakia’s  productivity  and 
To 
maintain  the  convergence  process,  sustained 
investment  efforts  are  needed  in  R&D,  digital 
and 
infrastructure,  and  energy 
efficiency.  Public  investment  –  supported  by  EU 
Funds - has been a stable and important source for 
addressing  investment  needs  since  EU  accession. 
Well-targeted  public  investment  should  tackle  the 
various  investment  needs  identified  in  this  report. 
The  remainder  of  this  chapter  examines  key 
investment gaps, including the need to boost R&D 
spending,  which  can  help  transform  the  heavily 
manufacturing-based 
into  one  of 
and 
increasingly 
technology.  Upgrading  the  digital  infrastructure 
can  prepare  citizens  and  businesses  for  new 
methods 
and 
producing.  Investing  into  energy  efficiency  and 
environmental technology can be a source of green 
growth and will help preserve scare environmental 
resources. 
transport 
infrastructure  –  both  road  and  rail  –  can  improve 
mobility  and  growth  potential,  and  expand 
sustainable forms of transport.  

communicating,  working 

home-made 

innovation 

Improving 

Slovakia's 

economy 

of 

Graph 3.4.1:  Evolution of labour productivity and gaps 

(GVA per worker in PPS) 

Source: AMECO, European Commission 

Use  of  financial  instruments  in  Slovakia  is 
increasing. While access to credit and financing is 
generally good, further potential lies in areas such 
as support to small and  medium-sized enterprises, 

36 

0%10%20%30%40%50%60%70%80%90%6080100120140160180200200020012002200320042005200620072008200920102011201220132014201520162017Gap2000=100SKDEEUPLCZHUvs EU (rhs) 
 
 
3.4. Competitiveness and investment 

among  the  lowest  in  the  EU  at  0.48  %  of  GDP. 
The sharp decline in public R&D funding in 2016 
due  to  the  transition  between  EU  funding  periods 
illustrated the over-reliance of the Slovak research 
system on the European Structural and Investment 
Funds and raises questions about the sustainability 
and adequacy of national R&D funding.  

Business  expenditure  in  R&D  appears  too  low 
to  substantially  boost  innovation  performance. 
Overall, business  R&D remains one of the lowest 
in  the  EU  and  has  centred  around  medium-high-
tech  manufacturing(31),  areas  dominated  by 
multinational  firms.  A  lack  of  R&D  strategy  and 
targeted  measures,  the  limited  engagement  of 
research  institutions  and  limited  research  capacity 
contribute  to  low  private  R&D  expenditure.  In 
addition,  at  0.14  %  of  GDP  in  2016,  business 
expenditure  in  R&D  by  small  and  medium-sized 
enterprises  remains  significantly  below  the  EU 
average.  As  a  result,  innovation  progress  is  low, 
and  Slovakia  remains  a  moderate 
innovator 
according to the European Innovation Scoreboard. 
Various  measures  are  underway  to  improve  the 
small  and  medium-sized  enterprises  ecosystem, 
mostly  financed  by  the  European  Structural  and 
Investment  Funds.  The  National  Business  Centre 
in Bratislava, offering  full assistance to small and 
medium-sized  enterprises  as  a  one-stop  shop,  is 
now  fully  operational  and  is  being  rolled  out  to 
regions. 

(31)  While the medium-high-tech business expenditure in R&D 
in 2015 was EUR 113 million, the high-tech areas attracted 
only EUR 7.5 million.  

innovations  and  start-ups,  social  entrepreneurship, 
student  mobility,  housing, 
redevelopment  of 
brownfield  sites,  energy  efficiency,  broadband 
networks  and  waste  management.  However,  the 
allocation  under  the  European  Structural  and 
Investment  Funds  for  financial  instruments  after 
the  selection  of  intermediaries  is  only  gradually 
being distributed to relevant beneficiaries. 

in 

Strategic investment plans are being devised by 
the  Slovak  authorities.  In  April  2018,  the  new 
Regional Investment Act came into force, aimed at 
regional  disparities  by  supporting 
balancing 
private 
least 
investment  and  employment 
developed regions. In June 2018, the Government 
adopted  the  Economic  Policy  Strategy  2030, 
focusing  on  raising  productivity  by  supporting 
human resource development, R&D, a less energy 
intensive economy, the business environment, and 
agriculture.  In  September  2018,  the  Government 
the  National 
approved  a  pilot  version  of 
Investment Plan for 2018-2030, focusing primarily 
on  transport,  energy,  electronic  communication, 
education,  research  and  innovation,  healthcare, 
inclusion, 
environment, 
employment  and  regional  development.  Although 
the  Plan  is  at  present  still  based  on  existing 
sectoral  strategies,  a  new  version  will  be  devised 
on the basis of Slovakia’s Vision and Development 
Strategy expected in April 2019.. The government 
plans  to  establish  an  integrated  framework  for 
coordination  and  integration  of  sectoral  policies 
the 
regional  development  as  part  of 
and 
implementation  process  of  the  Agenda  2030  for 
Sustainable  Development.  Its  success  will  depend 
on  the  extent  of  future  implementation,  and 
whether  the  Plan  can  genuinely  transform  from  a 
sectoral wish-list of projects to a forward-looking, 
unified investment strategy.    

agriculture, 

social 

Research and innovation 

Slovakia is highly dependent on EU funding for 
research  and  development  (R&D)  as  private 
investment  is  weak.  39  %  of  national  R&D 
investment  relies  on  foreign  funding  sources, 
notably  EU  Funds,  which  represent  89  %  of  all 
these  funds  (both  among  the  highest  in  the  EU). 
Although  overall  R&D  investment  has  risen  from 
0.45  %  of  GDP  since  2007  to  peak  at  1.2  %  in 
2015,  it  dropped  again  to  0.88  %  in  2017.  While 
public R&D investment rose from 0.27 % in 2007 
to 0.4 % in 2017, business R&D intensity remains 

37 

 
                                                           
Graph 3.4.2:  Business expenditures on R&D in % of GDP 

Source: JRC 

A  fragmented  research  system  harms  the 
effectiveness  of  public  R&D  investment  and 
scientific  research  quality.  The  share  of  high-
quality  scientific  publications  among  all  Slovak 
science  publications  remains  low(32),  and  only 
been one Slovak award grantee has been supported 
by  the  European  Research  Council  since  2007. 
This indicates persistent  weaknesses in translating 
rising  funding  into  high-quality  scientific  output 
collaboration.  Research, 
and 
development  and  innovation  policy  suffers  from 
ineffective  coordination  between  ministries  and 
implementing  agencies,  and  major  reforms  have 
been  regularly  postponed.  Domestic  technological 
development  is  low,  as  shown  by  weak  patenting 
activity  (33),  and  although  the  number  of  public-
private  scientific  co-publications  shows  some 
encouraging  results(34),  science-business  linkages 
are low, hindering broader knowledge diffusion.  

international 

stimulate 

To 
the 
government  extended  the  rate  of  the  R&D  tax 
allowance  to  100%  of  qualifying  expenditure. 

investment, 

private 

(32)  Scientific  publications  of  the  country  within the  top 10  % 
most cited scientific publications worldwide as percentage 
of  total  scientific  publications  of  the  country.  The  latest 
governmental review of spending on education admits low 
quality of scientific output and recommends increasing the 
amount of competitive grants in public R&D expenditures 
in  order 
in  research  (Slovak 
Government 2017). 

to  support  excellence 

(33)  Patent counts per million inhabitant in 2014 (9.3). 
(34)  The 2.9 % share of public-private scientific co-publications 
within  the  total  number  of  publications  ranked  Slovakia 
11th in the EU for the year 2017.   

3.4. Competitiveness and investment 

support 

total  government 

This  strengthens  the  hybrid  R&D  tax  allowance 
(35) introduced in 2015,  which  accounted  for 11% 
of 
for  business 
expenditure  in  R&D.  The  Regional  Investment 
Assistance  Act  introduces  a  preference    for  tax 
relief  over  direct  cash  subsidies  for  investors, 
encouraging  them  to  invest  in  higher  value-added 
technologies (see section 3.1).  

The use of critical EU funding for research and 
innovation remains inefficient. The support from 
EU funds to research infrastructure resulted in the 
completion  of  physical  infrastructure,  but  without 
sufficient  accompanying  funding  for  maintenance 
and staffing. The cancellation of various calls and 
administrative  inefficiencies  again  resulted  in  the 
de-commitment (36) of EUR 81 million funds from 
the  Operational  Programme  Research 
and 
Innovation. This was despite efforts to enhance the 
transparency  of  the  project  evaluation  process  by 
engaging  foreign  experts,  improving  selection 
criteria  and  enhancing  alignment  with  the  Smart 
Specialisation Strategy. However, various essential 
R&I-related  projects  to  increase  research  and 
transfer  of 
capacities,  promote 
innovation 
knowledge  and  technologies,  enhance  cooperation 
of  research  institutions  and  business,  mobilise 
private investment and support long-term strategic 
research  have  been  gradually  launched  only  as  of 
end of 2018. 

The  Smart  Specialisation  Strategy  is  still  in  its 
infancy.  While  Slovakia´s  Strategy  dates  back  to 
2013,  the  areas  of  specialisations  —  the  five 
priority domains (37) — were only agreed in 2017 
based  on  a    dialogue  with  entrepreneurs  to  fine 
tune  areas  of  specialisation.  Although  steps  were 
taken  to  enhance  the  efficiency  of  its  governance, 
limited  progress  has  been  made  in  implementing 
the 
Strategy 
Implementation  Plan,  which  comprises  essential 
measures  such  as:  i)  update  of  the  national 
infrastructure  roadmap  to  avoid  duplication  in 
further  investment;  ii)  preparation  of  the  State 
research, development and innovation strategy; iii) 

Specialisation 

Smart 

2017 

(35)  At a rate of 50 % to labour costs and at a rate of 25 % to 

other qualifying expenditures. 

(36)  If a sum committed to a programme has not been claimed 
by  the  end  of  the  third  year  following  the  programme’s 
adoption, any unpaid money ceases to be available to that 
programme, i.e. it is ‘de-committed’. 

(37)  i)  Vehicles  for  the  21th  century,  ii)  Industry  for  the  21th 
century,  iii)  Health,  food    and  environment,  iv)  Digital 
Slovakia and creative industry, v) Medical technology.  

38 

0.00.20.40.60.81.01.21.420102011201220132014201520162017% of GDPEUCzechiaHungaryPolandSlovakia 
 
                                                           
                                                           
3.4. Competitiveness and investment 

information communication technology specialists. 
The  Slovak  Information  Technology  Association 
estimates  that  an  additional  10  000  experts  are 
in  education  and 
needed.  Targeted  efforts 
(re)training  and  improved  labour  mobility  could 
help  mitigate  this  shortage,  thereby  increasing 
allocative  efficiency  and  thus  the  productivity  of 
the wider economy. The sector plays a critical role 
in  managing 
increasing 
digitisation and automation  — and  maintaining or 
further  improving  competitiveness,  especially  that 
of small and medium-sized enterprises. To address 
this,  a  ‘digital  coalition’  was  launched  in  2017  to 
gradually  implement  the  Action  Plan  with  23 
specific  measures,  including  the  EU-funded  ‘IT 
Academy’.  

the  global 

trend  of 

More  households  and  companies  can  use  fast 
and  ultra-fast  broadband  but  the  standard 
fixed coverage remains one of the lowest in the 
EU.  11%  of  households  do  not  have  access  to 
standard  fixed  broadband  (EU  average  3%  in 
2017)  and  the  overall  connectivity  stays  below 
other countries in the region (Graph 3.4.3). Slovak 
authorities have identified 207 “white spots” areas 
lacking  connectivity  of  at  least  30  Mbit/s  and 
telecom  operators  announced  their  intention  to 
cover these areas by 2020 (European Commission, 
2018h).  However,  there  is  a  need  to  reinforce  the 
accuracy  of  the  mapping  and  to  monitor  the 
effective  implementation  of  private  investment 
forecasts.  Beyond  the  2020  objective,  further 
private 
coordination 
stakeholders  will  be  necessary  regarding  the  roll-
out of very high capacity networks to reach the EU 
2025 broadband objectives. 5G networks will also 
increase the quality of overall connectivity but will 
require  a  high  capacity  backhaul  and  a  sufficient 
amount  of  harmonised  spectrum.  The  regulator 
plans  to  auction  relevant  spectrum  frequencies  in 
late 2019. 

between 

public 

and 

Kosice IT Valley can serve as a good example of 
a  cluster  driving  the  growth  of  a  regional 
information  communication  technology  hub. 
Besides Bratislava and Žilina, it is one of the main 
communication 
centres  of 
technology 
public 
administration, education institutions, research and 
that 
businesses 
stimulate growth and create high value-added jobs. 
Its objectives are to increase the sustainability and 
competitiveness  of  local  businesses,  support  a 

to  create  new  partnerships 

information 
It 

the 
industry. 

connects 

international 

reform  of  research,  development  and  innovation 
financing or iv) transforming the Slovak Academy 
of Science to public institution.. Only recently the 
government  announced  its  intention  to  undertake 
an 
research,  development  and 
innovation  audit  and  revise  the  Strategy  before 
2020.  Maintaining  an  ongoing  dialogue  with 
entrepreneurs  (entrepreneurial  discovery  process) 
to fine-tune areas of specialisation will be essential 
for well targeted use of EU funds. 

Digital transformation 

economy 

Technology 

to  a  digital 

Communications 

Moving 
requires 
companies to adapt to new business models and 
global trends. According to the Slovak Investment 
and  Trade  Development  Agency,  the  Information 
and 
sector 
contributes  4.6%  to  GDP,  and  due  to  its  role  as  a 
modern  manufacturing  hub,  Slovakia  has  the  15th 
highest  robot  density  in  the  world.  In  2018,  the 
Government  adopted  the  Action  Plan  for  Smart 
Industry  (Slovak  Government  2018).  Its  intended 
implementation  date  is  2020,  and  it  aims  to 
increase the competitiveness of Slovak businesses, 
create favourable conditions for automation trends 
start-up 
in  manufacturing, 
environment, 
facilitate 
investment  in  digital  solutions  and  ensure  the 
availability of a sufficiently skilled workforce (see 
section 3.3.). 

the 
innovation, 

improve 

support 

The  adoption  of  digital  business  practices  is 
progressing,  but  from  a  low  level.  The  share  of 
small  and  medium-sized  enterprises  selling  online 
has  decreased  to  13%,  which  remains  somewhat 
below  the  EU  average  of  17.2%,  according  to  the 
Digital  Economy  and  Society  Index  2018.  Only 
21% of companies used cloud services and 31% of 
businesses  shared  information  between  different 
parts  of  their  operations  via  resource  planning 
software.  The  take-up  of  these  and  other  digital 
trends  could  be  aided  by  setting  up  Digital 
Innovation Hubs. These centres of excellence will 
help  to  stimulate  the  uptake  of  and  the  needed 
Intelligence,  High 
investments 
Performance  Computing  and  Cybersecurity  by  all 
industry and public sector organisations.  

in  Artificial 

businesses 

information 
Slovak 
communication 
specialists  and 
technology 
digital  professionals.  The  majority  of  companies 
(60  %)  reported  problems  in  filling  vacancies  for 

lack 

39 

 
3.4. Competitiveness and investment 

in 

line  with 

target  for  2020.  Despite  improvement,  energy 
intensity,  a  measure  of  efficiency  remains  above 
the EU average (at 176 %, European Commission, 
2018f),  partially  due  to  the  structure  of  the 
economy.  Improving  energy  intensity  further  will 
require  substantial  investment,  but  the  currently 
low  financing  costs  represent  a  window  of 
opportunity for funding this. In its National Energy 
and  Climate  Plan,  to  be  adopted  by  31 December 
2019 
the 
Governance  of  the  Energy  Union  and  Climate 
Action(39),  Slovakia  will  provide  an  overview  of 
its  investment  needs  until  2030  for  the  different 
dimensions  of 
including 
renewable  energy,  energy  efficiency,  security  of 
supply, and climate mitigation and adaptation. The 
information  provided,  including  in  the  draft  plan 
submitted  on  21  December  2018,  will  further 
contribute  to  the  identification  and  assessment  of 
energy  and  climate-related  investment  needs  for 
Slovakia. 

the  Energy  Union, 

the  Regulation  on 

Improving energy efficiency in buildings in line 
with  the  National  Energy  Efficiency  Plans  can 
deliver  economic  and  environmental  benefits. 
The aim is to insulate the majority of all buildings 
by  2030,  thereby  cutting  energy  waste  and  its 
harmful  environmental  consequences.  From  May 
2019,  a  contribution  of  up  to  EUR  8000  will  be 
granted  not  only  for  the  insulation  of  family 
houses,  but  now  also  for  houses  with  nearly  zero 
energy  needs.  The  government  is  also  promoting 
the  use  of  Energy  Performance  Contracting.  EU 
funds  are  financing  the  renovation  of  public 
buildings  and  blocks  of  flats,  as  well  as  the 
modernisation of heating and power systems, with 
a combined total value of EUR 780 million.  

Meeting  renewable  energy  production  targets 
will require additional efforts. In 2017 the share 
of  renewable  energy  sources  fell  to  11.49 %  of 
gross  final  energy  consumption,  leaving  some 
distance  to  the  Europe  2020  target  of  14 %  by 

(39)  Regulation  (EU)  2018/1999  of  the  European  Parliament 
and  of  the  Council  of  11  December  2018  on  the 
Governance  of  the  Energy  Union  and  Climate  Action, 
amending  Regulations  (EC)  No  663/2009  and  (EC)  No 
715/2009  of  the  European  Parliament  and  of  the  Council, 
Directives  94/22/EC,  98/70/EC,  2009/31/EC,  2009/73/EC, 
2010/31/EU, 2012/27/EU and 2013/30/EU of the European 
the  Council,  Council  Directives 
Parliament  and  of 
2009/119/EC and (EU) 2015/652 and repealing Regulation 
(EU)  No  525/2013  of  the  European Parliament and  of  the 
Council (Text with EEA relevance). 

wider  offer  of 
technology-related  education 
programmes and motivate young people to take up 
careers  in  information  communication  technology 
and robotics. 

Graph 3.4.3:  Digital Connectivity Index (38) 

Source: Digital Economy and Society Index, European 
Commission 

is 

Following  the  national  eGovernment  strategy, 
Slovakia 
introducing  new  digital  public 
services  but  the  take-up  by  citizens  has  not  yet 
reached  the  average  EU  level.  The  use  of  the 
Central Portal of eGovernment Services is growing 
and  the  country  has  introduced  new  measures  to 
simplify authorisation of electronic documents and 
facilitate  electronic  communication  between  the 
government and businesses. However, the share of 
individuals  who  submitted 
to  public 
authorities over the internet (54%) stays below the 
EU average (64%). 

forms 

Energy and climate change 

Reaching 
the  energy-related  Europe  2020 
targets  requires  additional  investment,  which 
could  boost  competitiveness.  While  Slovakia  is 
on  track  to  achieve  its  target  for  greenhouse  gas 
emissions,  the  picture  for  energy  indicators  is 
mixed.  Final  energy  consumption  increased  in 
2016 to 10.4 Mtoe, moving away from the 9 Mtoe 

(38)  Digital  Economy  and  Society  Index  (DESI)  Connectivity 
Dimension is calculated as the weighted average of the five 
(20%),  Mobile 
sub-dimensions:  Fixed  Broadband 
Broadband 
(20%),  Ultrafast 
(30%),  Fast  broadband 
broadband (20%) and Broadband price index (10%). 

40 

7891011121314151620142015201620172018Index CZEUHUPLSK 
 
                                                           
                                                           
3.4. Competitiveness and investment 

November  2018 
the  Ministry  of  Economy 
proposed an Electromobility Action Plan for 2019-
2020 including, among other  things, the provision 
of  financial  support  for  purchasing  an  electric  car 
or  plug-in  hybrids  and  constructing  an  additional 
1,500 charging stations by 2025. Initiatives such as 
the  newly-founded  Slovak  Battery  Alliance  build 
on  the  economy's  automotive  cluster  and  offer  a 
new field for research and innovation. 

to  prevent  damage 

Slovakia  is  increasingly  vulnerable  to  climate 
risks. These include  floods, erosion, droughts and 
storms,  which  can  cause  major  harm  and 
disruption  to  human  life  and  economic  activity. 
Adaptation  measures  represent  a  cost-effective 
way 
to  national  and 
international  supply  chains,  which  rely  on  well-
functioning  transport  and  energy  infrastructure. 
Slovakia updated its National Adaptation Strategy 
in  October  2018  and  adopted  an  Action  Plan  on 
in  2018.  It  has 
drought  and  water  scarcity 
identified  water,  energy,  forestry,  and  soil  as 
priority sectors.  

Environment 

(EEA, 

Air  pollution,  waste  and  water  management 
and  forest  protection  are  the  country’s  key 
2018a). 
challenges 
environmental 
Investment  in 
these  sectors  is  predominantly 
financed  by  European  Structural  and  Investment 
Funds  (41).  The  new  Slovak  Envirostrategy  2030, 
to  provide 
currently  under  preparation,  aims 
integrated  policy 
inform 
investment  priorities  for  Slovakia  in  the  next 
funding 
of 
Environment, 2018). 

responses  and  can 

2021-2027 

(Ministry 

period 

Air  quality  has  worsened  in  several  regions. 
According to preliminary data for 2017, five out of 
10 air quality zones exceeded the daily limit value 
for  particulate  matter  (PM10),  up  from  one  in 
2016.  The  main  sources  are  emissions  from  the 
burning  of  solid  fuel  (including  biomass 
in 
households),  and  emissions  from  agriculture, 
transport  and  industry.  Moreover,  the  lack  of 
robust air quality monitoring and air pollution data 
complicates policy efforts (European Commission, 

2020. Electricity production is already low-carbon, 
with  nuclear  energy  and  hydropower  as  leading 
sources.  Electricity  grid  will  require  additional 
investments  to  further  enhance  their  flexibility  in 
relation  to  engagement  of  variable  renewable 
sources as concerns of grid stability and security of 
supply  were  given  as  the  main  reason  for  the 
connection  moratorium  (2013)  which  prevented 
and  still  prevents  the  installation  of  the  new 
renewable  energy  plants  and  has  resulted  in 
stagnation of capacity for the past years. This need 
was  also  the  rational  for  the  EU  support  for  the 
to 
smart  grid  project  ACON  with 
strengthening  the  distribution  systems  in  Czechia 
and  Slovak  Republic.  The  financial  burden  of 
renewable  energy  sources  subsidies  from  the  past 
led to a revised legal Act that moves from a feed-in 
tariff to auctions, but the timing and scope of these 
auctions  are  still  unclear.    In  2014-2020,  the 
purchase  of  small-scale  renewable  energy  sources 
successfully 
for  households  was 
equipment 
supported  by  voucher  schemes.  In  the  future, 
extending 
the 
participation  of  low-income  households  could 
alleviate energy poverty. 

their  coverage 

to  encourage 

the  aim 

Slovakia plans to phase out its environmentally 
harmful  subsidies  of  high-emissions  electricity 
generation  from  lignite(40).  In  November  2018, 
the  Slovak  Government  decided  to  advance  the 
phasing-out  of  domestic  coal 
for  electricity 
generation  from  2030  to  2023.  The  EU  Platform 
for  Coal  Regions  in  Transition  provides  financial 
support  to  make  the  transition  socially  equitable 
(European  Commission,  2017; 
JRC  2018). 
Slovakia is also supported in  its preparation of  an 
Action  Plan  to  transition  away  from  coal  in  the 
Horna Nitra region.   

The low-carbon transformation of the transport 
sector 
is  making  tentative  progress.  While 
overall  car  fleet  emissions  are  increasing  and  fuel 
taxes  do  not  reflect  CO2  intensities,  subsidy 
schemes  helped  to  put  vehicles  using  alternative 
fuel  sources 
total 
increasing  to  4,300  by  mid-2018  (Ministry  of 
Economy,  2018).  The  number  of  charging  points 
for electric vehicles has increased considerably. In 

into  circulation,  with 

the 

(40)  The current cost of subsidy for electricity production in the 
lignite power plant in Novaky via feed in tariffs is around 
EUR 116 million. The plant is the second largest source of 
GHG emissions in Slovakia. 

(41)  Absolute  Operational  Programmes  allocations  for  direct 
environmental  investments  in  2007-2013  was  EUR  1.8 
billion (European Commission 2017b), in 2014-2020 it will 
be  EUR  3.1  billion  for  Operation  Programme  Quality  of 
Environment. 

41 

 
                                                           
                                                           
3.4. Competitiveness and investment 

quality  wood  is  frequently  logged  and  burnt  for 
energy  purposes  (44).  The  adverse  impact  this  has 
on  carbon  emissions  and 
forest  ecosystems 
importance  of  safeguarding 
the 
underscores 
environmental  sustainability  when  investing  in 
renewable energies for heating and cooling. 

3.4.2 Single Market integration and the services 
sector 

A  heavily  regulated  business  environment  in 
professional  services  and  network  industries 
can  reduce  competition.  This  leads  to  higher 
consumer prices and limits innovation. The Slovak 
professional  services  sector  is  highly  regulated. 
The level of restrictiveness of regulation is higher 
than  the  weighted  EU  average  for  lawyers,  patent 
agents,  civil  engineers,  architects,  accountants, 
tourist  guides  and  real  estate  agents  (European 
Commission, 2017a; OECD, no date).  

Notwithstanding  a  steady  improvement  since 
2008,  Slovakia  still  shows  a  limited  integration 
into  the  Single  Market.  In  2017,  the  number  of 
single  market  directives  not  yet  transposed  has 
decreased from 7 to 5 since 2016, but the average 
transposition delay for overdue directives is above 
the EU average (at 9.8 months). Following years of 
marked underperformance in Single Market access 
of small and  medium-sized enterprises, latest data 
show  an  improvement  in  2017  in  relation  to 
traditional  goods  trade  as  well  as  online  exports 
(European Commission 2018c). 

Slovakia  contributes  to  building  the  European 
Digital Single Market. Slovakia works to increase 
the  range  of  digital  public  services  and  their 
interoperability  with  the  rest  of  the  EU.  In  2018, 
Slovakia 
to 
strengthen  cross-border  cooperation  in  Europe  in 
the fields of artificial intelligence, block chain and 
innovation  radar.  These  technologies  and  trends 
can potentially offer new growth opportunities.  

signed  European 

declarations 

The  energy  market 
liberalisation  process 
continues.  Retail  energy  markets  are  heavily 
regulated,  with  all  households  and  small  and 
medium-sized  enterprises  being  supplied  with 

(44)  Subsidies should cease according to the legislative change 
adopted in December 2018. However, this does not include 
woody biomass coming from calamity and sanitary logging 
on  NATURA  sites.  The  lacking  impact  assessment  can 
adversely affect the integrity of the sites. 

2018d).  The  harm  caused  by  poor  air  quality 
burdens  the  healthcare  system,  which  already 
struggles with low cost-effectiveness and high debt 
(see  section  3.1).  It  has  been  estimated  that  the 
health-related  external  costs  from  air  pollution  in 
Slovakia  exceed  EUR 3  billion  per  year  (income 
adjusted, 2010; EEA 2018a). In 2015, an estimated 
5,200  annual  premature  deaths  in  Slovakia  were 
attributable 
particulate  matter 
concentrations (EEA, 2018b). 

fine 

to 

concerns 

enterprises.  This 

Good waste management is a cornerstone of the 
circular  economy,  but  progress  is  slow.  Aside 
from environmental concerns, moving to a circular 
economy  saves  spending  on  resource  inputs.  In 
addition,  a  growing  sector  itself  offers  business 
opportunities  to  innovative  small  and  medium-
sized 
especially 
municipal  waste  recycling  and  water  treatment. 
The  recycling  rate  of  municipal  waste  (including 
composting) remains low at 23 %, close to half the 
EU  average  (45 %)  and  well  below  Slovakia’s 
target  of  50 %  by  2020  (European  Commission, 
2018b).  The  new  legislative  framework  put  in 
place  in  2016  has  not  yet  led  to  an  appreciable 
increase in recycling. Dumpsites and contaminated 
industrial  sites  also  present  a  problem.    The 
government 
for 
landfilling.  Some  regions  are  lagging  behind  in 
waste  water  treatment  and  collection  as  well  as 
drinking  water  supply  infrastructure,  highlighting 
potential 
the  water 
management  sector.  The  state  of  water  bodies  is 
not  improving  sufficiently  and  implementation  of 
measures  to  address  the  pressures  will  require 
further investments (42) (EEA, 2018c). Only 7% of 
agglomerations  below  2000 
inhabitants  are 
connected  to  the  public  wastewater  system,  often 
in  protected  natural  areas  including  Natura2000 
sites. 

investment 

increased 

recently 

needs 

fee 

the 

in 

Forests  are  under  severe  pressure  from  use  of 
wood-derived biomass and poor management in 
some  regions  (43).  Almost  50%  of  Slovak  forest 
overlaps  with  Natura  2000  network  and  requires 
investments due to their unfavourable status. High 

(42)  The  main  pressures  are  hydromorphological  alterations, 
diffuse  sources  of  pollution  from  agriculture,  as  well  as 
discharges  not  connected  to  sewage  network  or  waste 
disposal sites. 

(43)  In  October  2018,  the  Slovak  Ministry  of  Environment 
presented  new  proposals  for  a  Nature  Protection  Act,  to 
strengthen the management of nationally protected areas. 

42 

 
                                                           
                                                           
3.4. Competitiveness and investment 

electricity and gas at regulated prices. The current 
regulatory  system,  expected  to  apply  until  2021, 
hampers  market  development  and 
innovation. 
Although  energy  prices  are  in  general  lower  than 
the  EU  average,  electricity  prices  for  companies 
are  the  highest  in  the  region,  putting  Slovak 
companies at a competitive disadvantage. 

research,  development  and  innovation  through 
clusters  and  networking,  fostering  knowledge 
transfer  between  academia  and  businesses. 
Shortcomings also exist in public transport,  social 
services,  waste  management,  air  quality  and  a 
variety of associated investment needs are evident 
in these areas. 

New  market  rules  for  wholesale  markets 
continue  to  be  implemented.  These  rules  are 
supposed to improve — among other things — the 
transparency  of  gas  transmission  tariff  setting. 
Market  concentration  is  still  high  in  both  the 
electricity  and  gas  markets.  Parts  of  the  Slovak 
electricity  system  are  being  modernised  through 
investments  to  improve  its  reliability  e.g.  in 
Bystričany  nodal  area,  where  the  planned  EU  co-
funded 
should  be 
finalised  by  2021.  Following  some  success  in 
electricity  market  coupling,  Slovakia  still  has  an 
active  role  to  play  in  creating  a  pan-European 
electricity  market  by  actively  participating  in  the 
market  coupling  project  4MMC  (Czech  Republic, 
Slovakia,  Hungary,  Romania).  This  can  help  to 
strengthen  security  of  supply  and  competition  in 
the wholesale electricity market.  

infrastructure 

investment 

3.4.3 Regional disparities  

remain 

regions 

between 

disparities 

large 
is 

and 
Regional 
convergence 
slow. 
Divergences in economic and social outcomes (see 
section  1)  mainly  stem  from  challenges  in  the 
labour  market  and  in  education  (see  section  3.3), 
infrastructure  gaps  and  a 
targeted 
investment. These disparities point to an untapped 
growth  potential  that  has  not  yet  materialised  or 
could  be  exploited  further  (Bachtler  et  al.,  2017; 
European  Investment  Bank  2018b).  Aggregate 
productivity tends to grow more in countries where 
there is convergence across regions over time than 
in countries with divergence. 

lack  of 

in 

this 

Scoreboard. 

Heavy 
region,  good 

The  Bratislava  region  is  a  growth  pole  and  a 
‘strong’  innovator  according  to  the  European 
foreign 
Innovation 
investment 
transport 
connections  and  easy  access  to  ancillary  services 
contribute to its high productivity levels, which are 
average. 
the 
considerably 
EU 
swift  economic 
Notwithstanding  Bratislava’s 
for 
growth, 
in 
developing 

is  still  unused  potential 
collaboration 

cross-sectoral 

above 

there 

districts, 

challenges 

disadvantaged 

Within  less  developed  regions,  large  intra-
regional  differences  with  heterogeneous  socio-
persist.  The  most 
economic 
structurally 
often 
depopulating,  are  concentrated  in  the  South-East, 
North-East and the South-Central part of Slovakia. 
The  most  vulnerable  groups  of Slovak  society are 
particularly  affected,  such  as  the  Roma,  of  whom 
one quarter lives in marginalised communities (see 
section  3.3).  Out  of  Slovakia’s  14  most  deprived 
districts in 2001, 12 remained so 10 years later. 

the 
Low  administrative  capacity  hinders 
successful  deployment  of  regional  development 
strategies. Lessons learnt from the implementation 
of  European  Structural  and  Investment  Funds  in 
the funding period 2014-2020 show that support to 
local  administration  through  tailor-made  actions, 
such as the pilot phase of the Catching-up Regions 
initiative,  improves  the  quality  of  projects  and 
empowers local and regional authorities. 

Transport and infrastructure 

Strengthening  urban-rural  linkages  can  create 
positive  spillover  effects.  Existing 
integrated 
territorial  strategies  offer  good  frameworks  for 
supporting  such  linkages.  In  order  to  allow  less 
developed  regions  to  catch  up  and  become  more 
knowledge-based,  competitive  and  productive 
economies,  it  remains  important  to  fill  basic 
infrastructure  gaps  and 
transport 
networks 
investment.  While 
regional capitals suffer from poor air quality and a 
lack  of  sustainable,  quality  public 
transport, 
smaller  municipalities  in  rural  areas  still  lack 
environmental 
broadband 
connectivity  and  accessible  public  services  (see 
section 3.4.1 on digitalisation). 

through  strategic 

infrastructure, 

improving 

While  the  coverage  and  quality  of  transport 
infrastructure has improved, progress is uneven 
and some regions lag behind. Weaknesses in the 
transport  network  could  be  tackled  by  enhancing 
the  interconnectivity,  multimodality  and  inter-

43 

 
3.4. Competitiveness and investment 

improve  economic  convergence;  for  example, 
Slovakia is among the EU Member States with the 
longest time needed for firms to resolve insolvency 
(four years), which may depress economic activity 
(European Commission 2018d).  

Frequent  amendments  of  tax  legislation  have 
made  tax  compliance  for  enterprises  more 
burdensome  and  less  predictable.  Over  60%  of 
the  respondents  consider  the  complexity  of  tax 
laws  as  very  burdensome. 
tax 
legislation  in  Slovakia  is  subject  to  continuous 
change.  60%  of  enterprises  find  corporate  income 
tax  compliance  rather  or  very  irritating.  Despite 
this, many of them handle their tax compliance in-
house  and  35.3%  of 
the  respondents  never 
outsource it (European Commission, 2018e). 

Indeed, 

the 

A whole-of-government approach to regulatory 
policy  making  was  established  in  the  Better 
Regulation  Strategy  (RIA  2020).  This  strategy 
has  helped  to  strengthen  the  methodological  basis 
for  assessing  the  economic  impact  of  regulation.  
However,  the  RIA  2020  framework  and  other 
impact  assessment  tools  have  not  yielded  the 
expected results. Impact assessments only apply to 
measures  initiated  by  the  government.  Major 
amendments  proposed  by  the  Parliament,  as  well 
as local legislation, are not subject to any form of 
impact  assessment.  However,  methodologies  for 
these assessments are included in the action plan of 
the  RIA  2020  Strategy.  The  number  of  small  and 
medium-sized  enterprises  tests  is  still  insufficient 
but  is  expected  to  rise  once  the  Better  Regulation 
Center becomes fully established.  

The overall performance of the public sector is 
weak. In comparison to other EU Member States, 
Slovakia is particularly lagging behind in terms of 
government's  strategic  planning  capacity,  inter-
ministerial  coordination,  rule  of  law,  control  of 
corruption,  transparency  of  government  and  low 
impartiality  and  professionalism  of 
the  civil 
service 
  (J.  Nemec,  2018).  Education  and 
experience-based compensation rules in the public 
talent  attraction.  As  a  result, 
sector  hinder 
employees  are  typically  less  skilled  than  in  the 
private  sector  and  those  tertiary  educated  and 
working 
less. 
University  educated  public  employees  make  on 
their  private  sector 
less 
average  16% 
than 
counterparts. 
are 
schemes 
Compensation 
undergoing  review  by  the  Value  for  Money  and 

regions  make 

in  expensive 

low  scores  on  road  and  air 

operability  of  the  existing  public  and  urban 
transport  network,  and  by  promoting  sustainable 
modes  of  transport.  Slovakia  ranks  slightly  above 
the average in the 2016  EU Transport scoreboard, 
with 
transport 
infrastructure  and  road  safety.  It  scores  poorly  as 
regards the completion of both the Trans-European 
Transport Network core road and railway network, 
such  as  in  the  Rhine-Danube  corridor  (European 
Commission,  2016).  When  complete,  the  projects 
could  connect  the  less  developed  regions  of 
Prešov, as well as Banská Bystrica and Košice, to 
growth centres in other parts of the country. Better 
connections  and  easier  access  to  social  housing 
could  also  improve  the  low  internal  mobility  of 
workers  and  narrow  the  wage  differential,  while 
reducing  labour  shortages  in  prosperous  regions 
and  reducing  unemployment  in  less  developed 
ones (see section 3.3). 

3.4.4. Institutional quality and governance 

Business environment and institutional quality 

In 

both 

ground. 

The  Slovak  business  environment  is  slowly 
the  Global 
losing 
Competitiveness  Report  2018  and 
the  Doing 
Business  indicator,  Slovakia's  ranking  is  falling 
(GCR  2018,  World  Bank  2018),  making  it  harder 
for  the  Government  to  meet  its  goal  to  make 
Slovakia  one  of 
the  15  most  competitive 
economies by 2020. European investors point to a 
lack  of  qualified  workforce,  corruption,  unfair 
practices  in  public  procurement  and  in  the  use  of 
the  EU  funds,  low  legal  certainty  and  insufficient 
support  of  research  and  development  as  main 
concerns  (AHK  et  al.  2018).  The 
lack  of 
predictability  and  quality  of  legislation  are  also  a 
concern  for  businesses  (European  Commission 
2018c). 

The administrative burden is not being reduced 
enough  and  frequent  changes  to  legislation 
make  for  an  uncertain  business  environment. 
Reforms  to  cut  red  tape  for  small  and  medium-
sized  enterprises  have  not  been  completed,  thus 
potentially  stifling  growth  and  investments.  To 
improve  business  environment,  since  June  2017 
the  government  has  adopted  three  packages  of 
measures, which are being gradually implemented 
(45).    Removing  certain  regulatory  barriers  could 

(45)  The third package was adopted on 6 February 2019.  

44 

 
                                                           
 
3.4. Competitiveness and investment 

control  procedures  have  been  prepared  alongside 
the full deployment of electronic procedures.  

Significant steps have been taken in the area of 
professionalisation  of  public  procurement. 
Measures taken have included the establishment by 
the  Public  Procurement  Office  of  an  institute 
dedicated  to  offering  methodological  support  to 
contracting authorities. In addition, the  Office  has 
detailed  a  legislative  plan  to  create  a  chamber  of 
public  procurement  experts  who  would  act  as 
guarantors  of  the  quality  and  legality  of  public 
procurement  procedures.  The  Office  has  also 
announced  plans  for  regional  representations 
across the country to support public sector buyers. 
Meanwhile,  the  Government  Office  continued  its 
fund 
public  procurement 
administrators,  launching  an  e-learning  module  to 
complement existing in-person training. 

training  of  EU 

improvement 

into  widespread 

Professionalisation initiatives need more time to 
translate 
in 
practices.  2018  already  saw  early  signs  of 
strategic  use  of  public  procurement.  For  example, 
the  Ministry  of  the  Environment  started  using 
environmental  criteria  in  its  own  purchases  of 
paper, information technology and vehicles,  while 
conducting  analytical  studies  of  these  product 
categories with a view to future mandatory use of 
green criteria by other public bodies.  

that  can  help 

The  Ministry  of  Health  has  continued  to 
overhaul  its  approach  to  public  procurement. 
Proactive  engagement  with  suppliers 
through 
preliminary  market  consultations  has  yielded 
to  better  define 
knowledge 
reduce  questionable 
purchasing  needs 
to 
practices 
individual  hospital  staff.  Another 
innovation, 
trialled in the purchase of Computed Tomography 
scanners,  was 
introduction  of  minimum 
standards into the technical specifications.  

suppliers’  direct  marketing 

and 

the 

in 

Transparency  and  competition 
in  public 
procurement  has  seen  mixed  results  and  long-
term  IT  contracts  are  inflexible.  The  share  of 
negotiated 
publication 
procedures  without 
remained  at  5%  in  2018  and  the  use  of  quality 
criteria in awarding the contracts dropped from 8% 
to 4%, while the number of procedures where only 
one  tender  was  submitted  increased  from  14%  in 
2017  to  22%  in  2018.  The  average  length  of 
in  2018, 
procedures 

to  200  days 

increased 

government  announced  wage  audits  in  public 
institutions. In light of labour shortages, upcoming 
retirements and regional pay gaps, the provision of 
public services could worsen (Ministry of Finance 
2018d).  The  wage  increases  of  10  %  agreed  for 
2019 and 2020 are steps to mitigate this challenge. 
Progress  has  been  made  in  improving  public 
access  to  information  (European  Commission, 
2018)  and  in  preparing  the  spending  review 
dealing  with  human 
in  public 
administration.   

resources 

field.  This  concerns 

Political  influence  on  some  regulatory  agencies 
compromises  their  ability  to  ensure  a  level 
playing 
in  particular 
procedures  for  selecting  chairs  and  vice-chairs  as 
well  as  the  overall  functioning  of  regulatory 
institutions  (Transparency  International,  2018). 
Independent  and  accountable  regulators  could 
ensure  a  high-quality  regulatory  environment  and 
resource 
ultimately 
allocation and a more competitive economy. More 
generally,  a  lack  of  trust  in  institutions  is  among 
the main weaknesses of the business environment. 

ensure  more 

efficient 

The  lack  of  capacities  and  strategic  planning 
and  administrative  inefficiencies  hamper  the 
use  of  EU  funds.  After  a  slow  start  to  the  2014-
2020  funding  period,  implementation  is  now 
gradually  picking  up.  However,  distribution  of 
funds  to  final  beneficiaries  remains  low.  As  a 
result,  Slovakia  lost  EUR  120  million  of  funding 
for R&I and regional development. 

there 

administration, 

Within  public 
is 
insufficient  cooperation  between  government 
ministries  and  between  national,  regional  and 
local  levels.  The  fragmentation  of  government  at 
municipal level – 70% of municipalities have less 
than  1  000  inhabitants  –  creates  high  overheads 
and  harms  the  effectiveness  of  local  government. 
Thus, the financing capacities of municipalities are 
often  restricted  to  providing  basic  public  services 
and  infrastructure,  thereby  diverting  resources 
from social services, education, land planning and 
construction permits.  

Public procurement  

The  Slovak  authorities  have  been  making  an 
effort  to  simplify  and  increase  the  efficiency  of 
public  purchases.  Following  amendments  to  the 
Slovak Public Procurement Act, new guidelines on 

45 

 
3.4. Competitiveness and investment 

38  cases  have  been  recorded  (46).  There  are 
concerns  regarding  the  large  amount  of  discretion 
arising  from  the  requirement  to  report  in  good 
faith,  not  all  categories  of  officials  receive  the 
same  amount  of  protection,  and  there  are  no 
simultaneous  internal  and  external  channels  for 
reporting  misconduct  (OECD,  2017).  In  addition, 
the  procedure  to  prevent  retaliation  is  excessively 
complex. 

rights 

compared  to  108  in  2017.  Problems  remain  with 
high-value,  long-term  IT  contracts  which  allocate 
essential  proprietary 
large  private 
suppliers. This hinders the ability of public bodies 
to  achieve  best  value  for  money  through  regular 
updates and through splitting of contracts to enable 
small and medium-sized enterprises to bid directly 
rather than work under large operators. 

to 

Graph 3.4.4:  Public procurement 

Source: European Commission 

Corruption  

on 

Slovakia  remains  among  the  worst-performing 
EU  Member  States  on  corruption  indicators, 
making new policy measures crucial. In the 2018 
Global  Competitiveness  Index  rankings  for  ethics 
and  corruption,  as  well  as  for  diversion  of  public 
funds, Slovakia scores very poorly relative to other 
EU  Member  States.  It  also  ranks  as  one  of  the 
decision-making.  
worst 
Transparency 
Corruption 
Perceptions  Index  and  the  World  Bank’s  Control 
of  Corruption  Indicator  show  equally  poor  results 
for Slovakia. In late 2018 the government set out a 
new  Anti-corruption  Action  Plan  for  2019-2023. 
The  Action Plan  focuses on risk  management and 
risk analysis, and introduces a network of integrity 
officials in the central government. 

International’s 

favouritism 

in 

Whistleblower  protection  legislation  has  been 
effective  in only  a  limited  number  of  cases  and 
the government is planning its review.  Since the 
law on whistle-blowers entered into force in 2015, 

in 

of 

the 

interests 

Conflicts 
public 
administration  are  not  adequately  supervised. 
When  overhauling  the  anti-corruption  framework, 
the  Organisation  for  Economic  Co-operation  and 
Development  recommended  revising  the  current 
system of monitoring conflicts of interests (OECD, 
2017).  Declarations  of  conflicts  of  interest  by 
mayors  are  submitted  to  the  commission  of  a 
municipal  council,  while  the  deputies  of  a  town 
council  and  chairmen  of  a  higher  territorial  unit 
to  commissions  or 
submit 
assemblies  consisting  of  peers.  Thus,  there  is  no 
independent  system  in  place,  which  may  create 
disincentives  for  the  reviewers  to  flag  genuine 
concerns.  There  is  no  designated  body  to  provide 
guidance  or  monitoring  either.  Furthermore, 
Slovakia still has no legislation on lobbying. 

their  declarations 

in 

The  functional  independence  of  police  remains 
limited.   45% of the Slovak  population think that 
the  giving  and  taking  of  bribes  and  the  abuse  of 
power for personal gain are widespread among the 
police.(47)  Revolving  doors  practices 
the 
recruitment  of  police  officials  as  special  advisors 
in the Ministry of Interior may create incentives to 
bow  to  political  influence  and  reduce  the  level  of 
functional  police  independence.  It  could  also 
hinder  investigations  of  sensitive  or  high-level 
corruption  cases.  The  government  proposed  a 
revision  of 
rules  of  appointments  and 
dismissals in August 2018. However, a substantial 
revision of the rules of appointment and dismissal 
in  the  police  was  adopted  in  December  2018, 
which should improve the accountability of police 
chiefs. 

the 

The  number  of  high-level  corruption  cases 
investigation  has  risen  slightly  but 
under 

(46)  The  Act  307  (2014)  on  Certain  Measures  Related  to 
Reporting  of  Antisocial  Activities  and  on  amendment  to 
certain  other  laws  -  Data  communicated  by  the  Prime 
Minister’s Office to the European Commission. 

(47)  Special Eurobarometer 470: Corruption. Q7 

46 

0%20%40%60%80%100%120%Single BidderNo calls forbidsAward criteria(Cost only)2015201620172018 
 
                                                           
3.4. Competitiveness and investment 

remains very low.  The overall number of charges 
(2016:  109;  2017:  117;  2018:  124  (Jan-Nov)), 
indictments (55; 54; 47) and sentences (71; 98; 83) 
for corruption-related offences has fluctuated since 
2016,  after  a  sharp  drop  from  2015  (USP  GP  SR 
Pezinok,  2018).  The  new  rules  on  whistleblower 
protection have not led to a significant increase in 
reporting  corruption.  Further  efforts  to  improve 
detection  and  the  analytical  capacity  of  law 
enforcement  agencies  would  potentially  increase 
the  number  of  successfully  prosecuted  allegations 
of corruption. Following the  adoption of the 2016 
Act  on  the  responsibility  of  legal  persons,  the 
Slovak  judicial  authorities  have  started  applying 
and/or proposing measures against legal persons.  

in 2017, after having fallen in previous years (171 
days compared to 130 days in 2016). 

Efforts to improve the efficiency and quality of 
the justice system have started to bear fruit, but 
some  challenges  persist.  In  2017,  the  European 
Commission  for  the  Efficiency  of  Justice  of  the 
Council  of  Europe  conducted  a  functional  review 
of the Slovak justice system (CEPEJ 2017), which 
identified  a  number  of  areas  in  which  Slovakia 
could improve the functioning of its justice system. 
The  authorities  are  in  the  process  of  following  up 
on  these  recommendations,  and  it  remains  to  be 
seen which reforms will be implemented. 

Justice system  

Issues 

regarding 

Improving the effectiveness of the justice system 
remains  a  challenge. 
the 
efficiency, the independence and the quality of the 
justice system persist. Despite a number of reforms 
that  led  to  improvements  in  certain  areas,  long-
standing  concerns  regarding  the  independence  of 
the judiciary remain largely unchanged and do not 
appear to have been addressed.  

The time needed to resolve civil and commercial 
cases  rose  again  in  2017,  while  courts  largely 
manage  to  deal  with  their  caseload.  The 
administrative justice system continues to perform 
well and overall clearance rates show that, by and 
large,  courts  are  managing  to  deal  with  their 
caseload,  although  authorities 
reported  some 
challenges concerning cases pending for more than 
two  years.  Disposition  time  for  litigious  civil  and 
commercial  cases  at  first  instance  increased  again 

judicial 
(2019  EU 

Slovakia  remains  among  the  lowest-ranked  EU 
the  perceived 
Member  States  as  regards 
independence  of  the  judiciary.  Some  concerns 
over the independence of the judiciary persist and 
have not been addressed satisfactorily and the low 
independence  has  not 
perception  of 
improved 
Scoreboard, 
Justice 
forthcoming), 
thus  remaining  a  concern  for 
citizens,  as  well  as  for  businesses  and  investors.   
As a positive development, on 30 January 2019 the 
Constitutional Court ruled that the screening of the 
suitability  of  judges  on  the  basis  of  information 
from  the  National  Security  Authority,  which  had 
raised serious concerns about the independence of 
the  judiciary,  is  unconstitutional.  The  selection 
process  for  judges  of  the  Constitutional  Court, 
despite 
towards  more 
improvements 
transparency,  continues  to  create  controversy  and 
any  delay  in  the  appointment  of  constitutional 
judges,  due  in  February  2019,  or  failure  to  do  so 
could  impair  the  functioning  of  the  Constitutional 
Court. 

some 

47 

 
3.4. Competitiveness and investment 

Box 3.4.1: Investment challenges and reforms in Slovakia 

Section 1. Macroeconomic perspective  

After  a  period of  muted  investment  activity,  EU  funds  drawdown  in 2015  and  private  investment  reignited 
investment  activity  and  helped  to  reverse  the  declining  trend  in potential  growth.  In  2018, total investment 
activity in Slovakia is expected to have increased by around 12% year-on-year according to the Commission's 
2018  autumn  forecast,  with  the  main  drivers  being  the  non-residential  construction  and  traditional 
investments in machinery and equipment, notably the construction of a new car factory. For 2019 and 2020 
investment growth is expected to remain in positive territory but the pace will considerably slow down to 2-
3% year-on-year.   

Section 2. Assessment of barriers to investment and ongoing reforms  

While Slovakia shows clear success in some industrial sectors, notably the automotive industry, the overall 
business environment is not overly conducive to investment. Some reforms have been adopted or are in the 
pipeline, e.g. in education, public administration and the judicial system, but several barriers remain to be 
addressed. In addition, skilled labour shortages and infrastructure gaps hold back productivity growth. 

Main barriers to investment 

1/ The regulatory and administrative apparatus and public administration in general continue to hold back the 
business environment from expanding at full potential (EIB, 2018a). Frequent changes to the legislative and 
regulatory  framework  are  perceived  as  chronic  obstacles  to  investment  growth.  The  absorption  of  EU 
structural  funds  could  benefit  from  an  improvement  to  the  efficiency  of  public  administration,  notably  in 
relation to favouritism, high staff turnover, weak human resource management and analytical capacities. An 
insufficient degree of competition in public procurement also affects investment.  

2/  There  a  disconnect between  educational  institutions  and  labour  market  needs,  as  well  as  weak  access  to 
lifelong learning, resulting in shortages of skilled labour (EIB, 2018a). This concerns in particular sectors that 
could increase overall productivity, such as information and communication technology, and more generally 
the high-growth, innovative regions, such as Bratislava. Improving labour mobility, including by addressing 
challenges in the housing market, could also help alleviate regional disparities and misallocation. 

3/ Infrastructure, including sustainable transport, broadband access, waste management and energy efficiency, 
remains  underdeveloped  and  is  unequally  distributed  within  the  country.  Factors  that  hamper  investment 
include  a  lack  of  proper  planning,  low  capacity  in  administering  EU  funds,  inefficient  and  non-transparent 
public procurement procedures and complex land-use and construction permit processes. 

In Slovakia, Slovenská záručná a rozvojová banka, a.s. (SZRB) is a specialised financial institution owned by 
the Ministry of Finance with the mission to support and develop small and medium-sized businesses. SZRB 
does not operate as a competitor in the lending segment for small and medium-sized enterprises; its activities 
can support the needs of those companies especially when the commercial banks are reluctant to finance their 
projects due to short business history or insufficient collateral.  

48 

Regulatory/ administrative burdenTaxationPublic administrationCSRAccess to financePublic procurement /PPPsCSRCooperation btw academia, research and businessCSRJudicial systemCSRFinancing of R&D&IInsolvency frameworkBusiness services / Regulated professionsCompetition and regulatory frameworkRetailEPL & framework for labour contracts ConstructionWages & wage settingDigital Economy / TelecomEducation, skills, lifelong learning CSREnergyTransportLegend:No barrier to investment identifiedSome progressCSRInvestment barriers that are also subject to a CSRSubstantial progressNo progressFully addressedLimited progressNot assessed yetPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
ANNEX A: OVERVIEW TABLE 

Commitments  

Summary assessment ([1])  

2018 country-specific recommendations (CSRs)  

CSR 1:  

Ensure  that  the  nominal  growth  rate  of  net 
primary government expenditure does not exceed 
4,1  %  in  2019,  corresponding  to  an  annual 
structural adjustment of 0,5% of GDP.  

to 

the  cost 
increase 
Implement  measures 
effectiveness  of 
the  healthcare  system  and 
develop  a  more  effective  healthcare  workforce 
strategy.  

CSR 2:  

Slovakia has made Some Progress in addressing 
CSR 1  

The  compliance  assessment  with  the  Stability 
and  Growth  Pact  will  be  included  in  Spring 
when final data for 2018 will be available.  

Some  Progress  Inefficiencies 
in  healthcare 
spending  are  being  tackled,  including  through 
staffing 
better  procurement.  Healthcare 
is 
it  deserves 
the  policy  attention 
receiving 
although  tangible  results  are  slow  to  emerge. 
Public  hospitals  and  the  overall  care  system  are 
seeing  less  progress,  including  in  the  financial 
performance of the former.  

Slovakia has made Some Progress in addressing 
CSR 2  

quality 

Reinforce  activation  and  upskilling  measures, 
including 
and 
individualised services for disadvantaged groups, 
in particular by delivering on the action plan for 
the long-term unemployed.  

targeted 

training 

Some  Progress  Implementation  of  the  Action 
Plan  is  well  on  track.  Progress  on  upskilling 
measures  is  less  encouraging,  with  a  very  low 
participation  of 
and 
adults 
insufficient funding for skills training.  

learning 

in 

Foster  women's  employment,  especially  by 
extending affordable, quality childcare.  

the  quality  and 
by 

inclusiveness  of 
Improve 
education, 
the 
increasing 
participation  of  Roma  children  in  mainstream 
education from early childhood onwards.  

including 

CSR 3:  

Some Progress Some progress has been made in 
increasing  the  capacity  of  and  access  to  early 
childhood education and care, particularly for the 
over  threes.  But  employment  rates  do  not  yet 
reflect these improvements.  

Limited  Progress  A  new  national  reform 
programme and other measures were adopted in 
2018 to facilitate participation in early childhood 
education  and  care,  and  primary  education. 
Corresponding  investments  are  planned  from 
2019 to 2027. The Action plan includes lowering 
the age of obligatory schooling to 5 as of 2020, 
and enhancing the capacity of kindergartens, and 
measures  to  assist  the  integration  of  children 
from  disadvantaged  backgrounds,  with  special 
focus on the marginalised Roma communities.  

Slovakia  has  made  Limited  Progress 
addressing CSR 3  

in 

Increase  the  use  of  quality-related  and  lifecycle 

Some  Progress  With  the  latest  amendment  of 

49 

 
 
B. DSA statistical annex 

the  Public  Procurement  Act, 
the  Public 
Procurement office introduced measures to speed 
up Public Procurement to increase the absorption 
of  the  European  Structural  and  Investment 
Funds. Measures include updating the system of 
management 
for  European  Structural  and 
Investment  Funds  simplification  and  shortening 
of  public  procurement  procedures,  (re-)drafting 
of guidance and documentation for tenderers and 
improving 
the  professionalisation  of  public 
procurement.  Progress  is  being  made  as  regards 
efficiency and administrative capacity.  

Limited  Progress  Tackling  corruption  requires, 
among  other  things,  increasing  accountability  at 
the  level  of  police  and  prosecution,  which  has 
seen  little  change  yet.  However,  a  substantial 
the  rules  of  appointments  and 
revision  of 
in 
dismissals 
the  Police  was  adopted 
in 
December  2018,  which 
improve 
accountability of the police chiefs. 

should 

Limited  Progress  Only  limited  progress  has 
been  made  towards  improving  the  effectiveness 
of  the  justice  system.  Despite  a  number  of  past 
reforms that have led to improvements in certain 
the 
areas, 
independence 
remain 
unaddressed.  

long-standing  concerns  regarding 

judiciary 

the 

of 

for 

Limited  Progress  Limited  progress  has  been 
made  in  improving  stimulation  for  business 
innovation  with  the  extended  rate  of  the  R&D 
tax  allowance  and  other  upcoming  support 
schemes 
the  small  and  medium-sized 
enterprises ecosystem, mostly financed from the 
European  Structural  and  Investment  Funds. 
However,  measures  to  improve  efficiency  and 
consolidate  the  public  research  system  are  still 
not  adopted,  notably  the  transformation  of  the 
Slovak  Academy  of  Sciences  or  a  broader 
assessment  of 
innovation 
system. 

the  research  and 

cost criteria in public procurement operations.  

including  by  ensuring 
Tackle  corruption, 
enforcement  of  existing 
legislation  and  by 
increasing  accountability  at  the  level  of  police 
and prosecution.  

Improve  the  effectiveness  of  the  justice  system, 
in  particular  by  safeguarding  independence  in 
judicial appointment procedures.  

Reduce the  fragmentation of  the public research 
innovation, 
system  and  stimulate  business 
including 
and  medium-sized 
enterprises.  

small 

for 

Europe 2020 (national targets and progress)  

50 

 
 
 
 
B. DSA statistical annex 

Employment rate target set in the NRP: 72 %.  

R&D target set in the NRP: 1.2 % of GDP  

strong 

The  labour  market  situation  improved  on  the 
back  of 
economic  growth.  The 
employment  rate  rose  to  71.9  %  in  the  second 
quarter of 2018, close to the national target to be 
reached by 2020. 

Although the share of R&D funding has risen in 
the  last  ten  years  to  peak  at  1.2  %  of  GDP  in 
2015, it significantly dropped the year after. The 
share  recovered  to  0.88%  of  GDP  in  2017,  but 
further increases are needed to reach the goal set 
for  2020.  In  2017,  R&D  intensity  in  Slovakia 
was  composed  of  54%  private 
investment 
(0.48%  of  GDP  )  and  45%  public  investment 
(0.40% of GDP). 

(GHG)  emissions 

National  greenhouse  gas 
target:  
+ 13 % in 2020 compared with 2005 (in sectors 
not 
trading 
scheme)  

the  EU  emissions 

included 

in 

is  set 

its  2020 
Slovakia 
greenhouse  gas  target  in  sectors  outside  the 
emission trading system. 

to  overachieve 

2020 renewable energy target: 14 %  

Energy  efficiency,  2020  energy  consumption 
targets:  

Slovakia's  2020  energy  efficiency  target  is  to 
have  a  maximum  consumption  of  16.4  Mtoe 
(primary energy) and of 9.0 Mtoe (final energy) 

Early school/training leaving target: 6 %.  

Slovakia  had a 12 %  share of renewable energy 
in  gross  final  consumption  in  2016  (Eurostat). 
This was above the indicative goal for 2017/2018 
of  11.4  %  needed  to  stay  on  track  towards  its 
2020  target,  however  2016  shares  for  Slovakia 
are lower than those of 2015, pointing to the risk 
of a decreasing trend. 

Both  primary  and  final  energy  consumption 
increased  in  2017,  consolidating  the  upward 
trend started in 2015. 

The  primary  energy  consumption  was  of  16.1 
Mtoe in 2017, still below the EU 2020 target, but 
considerably  higher  than  in  2016.  Final  energy 
consumption  stood  at  11.1  Mtoe,  exhibiting  a 
trend  that  makes  reaching  the  2020  target  very 
unlikely.  Enhanced  efforts  need  to  be  put  into 
and  additional  measures  considered  for  keeping 
primary  energy  consumption 
in  check  and 
considerably reducing final energy consumption. 

School  dropout  has  risen  and  there  are  large 
regional  disparities.  The  rate  of  early  school 
leaving  is  still  below  the  EU  average  of  10.6%, 
at 9.3 % in 2017, and has been deteriorating from 
5.3  %  in  2012.  Eurostat  data  show  a  sizeable 
regional variation. The highest and fastest-rising 
levels  are  in  eastern  Slovakia,  where  ESL 
exceeds  14  %;  compared  to  4.7  %  in  western 

51 

 
B. DSA statistical annex 

regions.  FRA  estimates  that  58  %  of  Roma 
children  are  early  school  leavers.  The  rate  of 
young  people  aged  15-24  not  in  employment, 
education  or  training  rose  to  21.4  %  in  2017 
from 12.3% in 2016, which is well above the EU 
average of 17.2 %. 

The  tertiary  educational  attainment  rate  rose  by 
close  to  8  pps.  since  2012  to  34.3  %  in  2017 
while below the EU average of 39.9 %. The gap 
between  Slovakia  and  the  EU-28  average  has 
been narrowing over time, from 15.3 pps in 2007 
to  only  5.6  pps  a  decade  later.  Women  (at  42.4 
%),  for  whom  the  national  target  was  met, 
strongly outperformed men (at 26.7 %). 

The number of people at risk of poverty or social 
exclusion  has  further  fallen  to  16.3  %,  and  is 
significantly  below  the  EU  average.  As  of  2017 
there has been a cumulative decrease of 255 000 
target 
persons  since  2008,  well  above 
(Eurostat). 

the 

Tertiary  education  target:  40  %  of  population 
aged 30-34.  

Target  rate  of  the  number  of  people  living  in 
poverty or social exclusion: 17.2%; expressed as 
an absolute number: decrease of 170 000 people 
(compared to 2008: rate of 20.6%, i.e. 1 111 000 
people living in poverty or social exclusion). 

([1])  The  following  categories  are  used  to  assess  progress  in  implementing  the  country-specific 
recommendations (CSRs): 

No  progress:  The  Member  State  has  not  credibly  announced  nor  adopted  any  measures  to  address  the 
CSR. This category covers a number of typical situations to be interpreted on a case by case basis taking 
into account country-specific conditions. They include the following:  

no legal, administrative, or budgetary measures have been announced  

in the national reform programme, 

in any other official communication to the national Parliament/relevant parliamentary committees or the 
European Commission, 

publicly (e.g. in a press statement or on the government's website); 

no non-legislative acts have been presented by the governing or legislative 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 to be taken (unless the CSR explicitly asks for orientations 
or  exploratory  actions).  However,  it  has  not  proposed  any  clearly-specified  measure(s)  to  address  the 
CSR. 

Limited progress: The Member State has:  

announced certain measures but these address the CSR only to a limited extent; and/or 

presented  legislative  acts  in  the  governing  or  legislative  body  but  these  have  not  been  adopted  yet  and 
substantial further, non-legislative work is needed before the CSR is implemented; 

52 

 
 
 
  
B. DSA statistical annex 

presented non-legislative acts, but has not followed these up with the implementation needed to address 
the CSR. 

Some progress: The Member State has adopted measures  

that partly address the CSR; and/or  

that address the CSR, but a fair amount of work is still needed to fully address the CSR fully as only a 
few of the measures have been implemented. For instance, a measure or measures have been adopted by 
the national Parliament or by ministerial decision but no implementing decisions are in place.  

Substantial progress: The  Member State has adopted measures that go a long way towards addressing 
the CSR and most of them have been implemented.  

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

53 

 
ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

B. DSA statistical annex 

54 

General Government debt projections under baseline, alternative scenarios and sensitivity tests2017201820192020202120222023202420252026202720282029Gross debt ratio50.948.846.444.242.240.539.137.736.335.033.932.831.9Changes in the ratio (-1+2+3)-0.8-2.2-2.4-2.2-2.0-1.6-1.4-1.5-1.4-1.3-1.2-1.0-0.9of which(1) Primary balance (1.1+1.2+1.3)0.60.70.80.90.80.70.60.60.50.50.40.40.3(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)0.50.40.30.50.50.50.60.60.50.50.40.40.3(1.1.1) Structural primary balance (bef. CoA)0.50.40.30.50.50.50.50.50.50.50.50.50.5(1.1.2) Cost of ageing0.0-0.1-0.1-0.1-0.10.00.10.10.2(1.1.3) Others (taxes and property incomes)0.00.00.00.00.00.00.00.00.0(1.2) Cyclical component0.10.30.50.50.30.20.00.00.00.00.00.00.0(1.3) One-off and other temporary measures0.00.00.00.00.00.00.00.00.00.00.00.00.0(2) Snowball effect (2.1+2.2+2.3)-0.8-1.9-2.0-1.6-1.2-0.9-0.8-0.9-0.8-0.8-0.7-0.7-0.6(2.1) Interest expenditure1.41.31.21.11.01.01.01.00.90.91.01.01.0(2.2) Growth effect-1.6-1.9-1.9-1.5-1.2-1.0-1.0-1.1-1.0-1.0-1.0-1.0-0.9(2.3) Inflation effect-0.6-1.3-1.3-1.2-1.0-0.9-0.8-0.8-0.7-0.7-0.7-0.7-0.6(3) Stock-flow adjustments0.60.40.40.40.00.00.00.00.00.00.00.00.0Note: For further information, see the European Commission Fiscal Sustainability Report (FSR) 2018. b. For the medium-term, the risk category (low/medium/high) is based on the joint use of the S1 indicator and of the DSA results. The S1 indicator measures the fiscal adjustment required (cumulated over the 5 years following the forecast horizon and sustained thereafter) to bring the debt-to-GDP ratio to 60 % by 2033. The critical values used are 0 and 2.5 pps. of GDP. The DSA classification is based on the results of 5 deterministic scenarios (baseline, historical SPB, higher interest rate, lower GDP growth and negative shock on the SPB scenarios) and the stochastic projections. Different criteria are used such as the projected debt level, the debt path, the realism of fiscal assumptions, the probability of debt stabilisation, and the size of uncertainties. c. For the long-term, the risk category (low/medium/high) is based on the joint use of the S2 indicator and the DSA results. The S2 indicator measures the upfront and permanent fiscal adjustment required to stabilise the debt-to-GDP ratio over the infinite horizon, including the costs of ageing. The critical values used are 2 and 6 pps. of GDP. The DSA results are used to further qualify the long-term risk classification, in particular in cases when debt vulnerabilities are identified (a medium / high DSA risk category). [2]Thechartspresentaseriesofsensitivitytestsaroundthebaselinescenario,aswellasalternativepolicyscenarios,inparticular:thehistoricalstructuralprimarybalance(SPB)scenario(wheretheSPBissetatitshistoricalaverage),theStabilityandGrowthPact(SGP)scenario(wherefiscalpolicyisassumedtoevolveinlinewiththemainprovisionsoftheSGP),ahigherinterestratescenario(+1pp.comparedtothebaseline),alowerGDPgrowthscenario(-0.5pp.comparedtothebaseline)andanegativeshockontheSPB(calibratedonthebasisoftheforecastedchange).Anadversecombinedscenarioandenhancedsensitivitytests(ontheinterestrateandgrowth)arealsoincluded,aswellasstochasticprojections. Detailed information on the design of these projections can be found in the FSR 2018.SK - Debt projections baseline scenario[1]Thefirsttablepresentsthebaselineno-fiscalpolicychangescenarioprojections.Itshowstheprojectedgovernmentdebtdynamicsanditsdecompositionbetweentheprimarybalance,snowballeffectsandstock-flowadjustments.Snowballeffectsmeasurethenetimpactofthecounteractingeffectsofinterestrates,inflation,realGDPgrowth(andexchangerates in some countries). Stock-flow adjustments include differences in cash and accrual accounting, net accumulation of assets, as well as valuation and other residual effects.[3] The second table presents the overall fiscal risk classification over the short, medium and long-term. a. For the short-term, the risk category (low/high) is based on the S0 indicator. S0 is an early-detection indicator of fiscal stress in the upcoming year, based on 25 fiscal and financial-competitiveness variables that have proven in the past to be leading indicators of fiscal stress. The critical threshold beyond which fiscal distress is signalled is 0.46. 20253035404550556020162017201820192020202120222023202420252026202720282029Debt as % of GDP -SKBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario203040506020162017201820192020202120222023(% of GDP)Stochastic debt projections 2019-2023 -SKp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline20253035404550556020162017201820192020202120222023202420252026202720282029Debt as % of GDP -SKBaselineHistorical SPB scenarioSGP scenario20253035404550556020162017201820192020202120222023202420252026202720282029Debt as % of GDP -SKBaselineHigher interest rate scenarioNegative shock on the SPBLower GDP growth scenarioBaselineHistorical SPBLower GDP growthHigher interest rateNegative shock on SPBStochastic projectionsRisk categoryLOWLOWLOWLOWLOWLOWDebt level (2029)31.947.533.933.032.2Debt peak year20182018201820182018Percentile rank50.0%75.0%Probability debt higher20.2%Dif. between percentiles27.4MEDIUMLong termDSALOWDebt sustainability analysis (detail)Medium termLOWLOWShort termLOW(S0 = 0.3)(S1 = -2.9)S2MEDIUM(S2 = 2.5)S1 
 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2018. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 2018. 
(3) As per ECB definition of gross non-performing debt instruments 
(4) 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). 

55 

201320142015201620172018Total assets of the banking sector (% of GDP)1)82.384.487.390.191.588.8Share of assets of the five largest banks (% of total assets)70.370.772.372.774.5-Foreign ownership of banking system (% of total assets)2)88.184.385.183.684.484.7Financial soundness indicators:2)              - non-performing loans (% of total loans)-5.24.44.63.73.8              - capital adequacy ratio (%)17.517.317.718.018.617.8              - return on equity (%)3)10.09.29.79.99.310.5Bank loans to the private sector (year-on-year % change)1)6.47.410.410.010.39.8Lending for house purchase (year-on-year % change)1)11.913.613.814.412.811.5Loan to deposit ratio2)-92.790.390.596.298.2Central Bank liquidity as % of liabilities1)-1.11.21.31.71.6Private debt (% of GDP)76.982.583.390.596.1-Gross external debt (% of GDP)2) - public32.937.933.532.832.331.5    - private32.130.631.133.038.138.2Long-term interest rate spread versus Bund (basis points)*161.890.838.945.359.946.5Credit default swap spreads for sovereign securities (5-year)*83.753.344.939.238.840.9 
 
 
 
 
 
C. Standard Tables 

Table C.2: 

Headline Social Scoreboard indicators 

(1) People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from 
severe material deprivation (SMD) and/or living in households with zero or very low work intensity (LWI). 
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks. 
(3) Long-term unemployed are people who have been unemployed for at least 12 months. 
(4) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2019. 
(5) Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation). 
(6) Average of first three quarters of 2018 for the employment rate, unemployment rate and gender employment gap. Data 
for unemployment rate is annual. 
Source: Eurostat 

56 

201320142015201620172018 6Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)6,46,76,97,49,3:Gender employment gap (pps)14,414,614,714,212,813,8Income inequality, measured as quintile share ratio (S80/S20)3,63,93,53,63,5:At-risk-of-poverty or social exclusion rate1 (AROPE)19,818,418,418,116,3:Young people neither in employment nor in education and training (% of population aged 15-24)13,712,813,712,312,1:Dynamic labour markets and fair working conditions†Employment rate (20-64 years)65,065,967,769,871,172,2Unemployment rate2 (15-74 years)14,213,211,59,78,16,6Long-term unemployment rate3 (as % of active population)10,09,37,65,85,14,2Gross disposable income of households in real terms per capita4 (Index 2008=100) 99,3101,8105,8108,6111,4:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)11308116981210612446::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)-1,21,12,43,1::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction536,335,735,331,029,1:Children aged less than 3 years in formal childcare3,06,51,10,50,6:Self-reported unmet need for medical care1,92,12,12,32,4:Individuals who have basic or above basic overall digital skills (% of population aged 16-74)::53,055,059,0: 
 
 
 
 
 
C. Standard Tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator 
(1) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with ten or more employees, without restrictions for age and hours worked, are included. 
(2) PISA (OECD) results for low achievement in mathematics for 15 year-olds. 
(3) Impact of socio-economic and cultural status on PISA (OECD) scores. Values for 2012 and 2015 refer respectively to 
mathematics and science. 
(4) Average of first three quarters of 2018. Data for youth unemployment rate annual. 
Source: Eurostat, OECD 

57 

Labour market indicators201320142015201620172018 4Activity rate (15-64)69,970,370,971,972,172,3Employment in current job by durationFrom 0 to 11 months8,09,611,712,012,3:From 12 to 23 months7,17,38,28,69,0:From 24 to 59 months17,917,816,316,916,7:60 months or over66,965,363,862,562,0:Employment growth* (% change from previous year)-0,81,42,02,42,22,1Employment rate of women(% of female population aged 20-64)57,858,660,362,764,765,3Employment rate of men (% of male population aged 20-64)72,273,275,076,977,579,0Employment rate of older workers* (% of population aged 55-64)44,044,847,049,053,053,9Part-time employment* (% of total employment, aged 15-64)4,55,15,85,85,85,1Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)6,88,810,59,99,48,4Participation in activation labour market policies(per 100 persons wanting to work)13,514,513,619,8::Transition rate from temporary to permanent employment(3-year average)41,239,435,736,0::Youth unemployment rate (% active population aged 15-24)33,729,726,522,218,915,4Gender gap in part-time employment (aged 20-64)2,83,04,13,84,14,0Gender pay gap1 (in undadjusted form)18,819,719,619,019,8:Education and training indicators201320142015201620172018Adult participation in learning(% of people aged 25-64 participating in education and  training)3,13,13,12,93,4:Underachievement in education2::27,7:::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)26,926,928,431,534,3:Variation in performance explained by students' socio-economic status3::16,0::: 
 
 
 
 
 
C. Standard Tables 

Table C.4: 

Social inclusion and health indicators 

* Non-scoreboard indicator 
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income.  
(2) 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. 
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation. 
(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) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59. 
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard. 
Source: Eurostat, OECD 

58 

201220132014201520162017Expenditure on social protection benefits* (% of GDP)Sickness/healthcare5,35,55,65,55,8:Disability1,61,61,61,61,6:Old age and survivors7,77,98,28,18,0:Family/children1,71,71,71,61,6:Unemployment0,70,60,50,50,5:Housing0,00,00,00,00,0:Social exclusion n.e.c.0,40,40,40,30,3:Total17,517,818,017,717,9:of which: means-tested benefits0,90,90,90,80,7:General government expenditure by function (% of GDP, COFOG)Social protection15,015,315,115,115,1:Health6,86,87,07,17,4:Education4,14,04,14,23,8:Out-of-pocket expenditure on healthcare (% of total health expenditure)23,223,318,018,417,9:Children at risk of poverty or social exclusion (% of people aged 0-17)*26,625,523,624,924,422,5At-risk-of-poverty  rate1 (% of total population)13,212,812,612,312,712,4In-work at-risk-of-poverty rate (% of persons employed)6,25,75,76,06,56,3Severe material deprivation rate2  (% of total population)10,510,29,99,08,27,0Severe housing deprivation rate3, by tenure statusOwner, with mortgage or loan2,93,91,63,22,01,5Tenant, rent at market price12,39,19,47,66,011,1Proportion of people living in low work intensity households4 (% of people aged 0-59)7,27,67,17,16,55,4Poverty thresholds, expressed in national currency at constant prices*371034783465353035533689Healthy life years (at the age of 65)Females3,13,73,63,84,2:Males3,54,24,34,14,5:Aggregate replacement ratio for pensions5 (at the age of 65)0,60,60,60,60,60,6Connectivity dimension of the Digital Economy and Society Inedex (DESI)6::38,544,948,954,1GINI coefficient before taxes and transfers*41,941,343,239,840,540,3GINI coefficient after taxes and transfers*25,324,226,123,724,323,2 
 
 
 
 
C. Standard Tables 

Table C.5: 

Product market performance and policy indicators 

(1) Value added in constant prices divided by the number of persons employed. 
(2) Compensation of employees in current prices divided by value added in constant prices. 
(3) The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology.  
(4) 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 codified as follows: zero if received everything, one if 
received 75% and above, two if received below 75%, three if refused or rejected and treated as missing values if the 
application is still pending or don't know. 
(5) Percentage population aged 15-64 having completed tertiary education. 
(6) Percentage population aged 20-24 having attained at least upper secondary education. 
(7) Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail here: http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm 
(8) Aggregate OECD indicators of regulation in energy, transport and communications (ETCR). 
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). 

59 

Performance indicators201220132014201520162017Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry1,07-0,0511,317,122,280,93Labour productivity growth in construction9,54-9,424,253,52-3,254,59Labour productivity growth in market services1,534,51-4,440,42-0,800,60Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry4,613,46-7,08-3,290,405,13ULC growth in construction-7,7611,41-3,521,685,34-1,85ULC growth in market services-0,44-2,876,973,681,905,67Business environment201220132014201520162017Time needed to enforce contracts3 (days)545615775775775775Time needed to start a business3 (days)28,533,526,526,526,526,5Outcome of applications by SMEs for bank loans4:1,070,830,650,610,74Research and innovation201220132014201520162017R&D intensity0,800,820,881,170,790,88General government expenditure on education as % of GDP4,104,004,104,203,80:Employed people with tertiary education and/or people employed in science and technology as % of total employment373737373838Population having completed tertiary education5171818192021Young people with upper secondary education6939191919089Trade balance of high technology products as % of GDP-5,55-5,32-5,07-5,77-6,02-4,19Product and service markets and competition200320082013OECD product market regulation (PMR)7, overall2,181,621,29OECD PMR7, retail1,141,041,75OECD PMR7, professional services::2,90OECD PMR7, network industries83,332,281,88 
  
 
 
 
 
C. Standard Tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices) 
          Energy intensity: gross inland energy consumption (Europe 2020-2030)(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 % of total value added for the economy 
Industry energy intensity: final energy use of industry (in kgoe) divided by gross value added of industry (in 2010 EUR)  
Real unit energy costs for manufacturing industry excluding refining : real costs as % 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 GHG emissions (excl 
land use, land use change and forestry) as reported by Member States to the European Environment Agency. 
Transport energy intensity: final energy use in transport sector including aviation, (in kgoe) divided by transport industry gross 
value added (in 2010 EUR) 
Transport carbon intensity: GHG emissions in transport sector divided by gross value added of the transport activities 
Energy import dependency: net energy imports divided by gross inland energy consumption plus consumption of 
international maritime bunkers 
Aggregated supplier concentration index:  Herfindahl-Hirschman index for net imports of crude oil and NGL, natural gas and 
hard coal. Smaller values indicate larger diversification and hence lower risk. 
Diversification of the energy mix: Herfindahl-Hirschman index of the main energy products in the gross inland consumption of 
energy 
* European Commission and European Environment Agency 

Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes); Eurostat (all other indicators) 

60 

Green growth performance201220132014201520162017MacroeconomicEnergy intensity kgoe / €0,230,230,210,210,210,21Carbon intensity kg / €0,610,590,550,530,52-Resource intensity (reciprocal of resource productivity)kg / €0,910,860,920,890,920,88Waste intensity kg / €0,12-0,12-0,13-Energy balance of trade % GDP-5,9-5,9-4,3-3,5-2,7-3,5Weighting of energy in HICP%18,916,516,215,514,914,4Difference between energy price change and inflation %1,8-1,9-2,0-2,0-2,4-5,7Real unit of energy cost% of value added30,929,525,424,623,9-Ratio of environmental taxes to labour taxesratio0,110,110,110,110,11-Environmental taxes% GDP1,71,71,81,81,81,8Sectoral Industry energy intensity kgoe / € 0,140,140,130,130,120,12Real unit energy cost for manufacturing industry excl. refining% of value added24,422,021,120,720,2-Share of energy-intensive industries in the economy% GDP13,112,313,915,617,417,7Electricity prices for medium-sized industrial users€ / kWh0,130,130,120,110,110,11Gas prices for medium-sized industrial users€ / kWh0,040,040,040,030,030,03Public R&D for energy % GDP0,000,000,010,010,000,00Public R&D for environmental protection% GDP0,010,010,010,010,010,01Municipal waste recycling rate%13,310,810,314,923,029,8Share of GHG emissions covered by ETS*%50,750,951,551,251,8-Transport energy intensitykgoe / €0,620,630,460,410,540,55Transport carbon intensitykg / €1,841,841,371,271,47-Security of energy supplyEnergy import dependency%61,660,862,160,160,664,8Aggregated supplier concentration indexHHI66,168,970,468,566,1-Diversification of energy mixHHI0,220,220,210,200,200,20 
 
 
 
 
ANNEX D: INVESTMENT GUIDANCE ON COHESION POLICY 

FUNDING 2021-2027 FOR SLOVAKIA 

Building  on  the  Commission  proposal  for  the  next  Multi-Annual  Financial  Framework  for  the  period 
2021-2027  of  2  May  2018  (COM  (2018)  321),  this  Annex  D  presents  the  preliminary  Commission 
services views on priority investment areas and framework conditions for effective delivery for the 2021-
2027  Cohesion  Policy (48).  These  priority  investment  areas  are  derived  from  the  broader  context  of 
investment  bottlenecks,  investment  needs  and  regional  disparities  assessed  in  the  report.  This  Annex 
provides  the  basis  for  a  dialogue  between  Slovakia  and  the  Commission  services  in  view  of  the 
programming of the cohesion policy funds (European Regional Development Fund, Cohesion Fund and 
European Social Fund Plus). 

Policy Objective 1: A Smarter Europe – Innovative and smart industrial transformation 

Slovakia has shown limited progress in improving research and innovation performance with targets for 
research  and  development  spending  below  the  EU  average.  High  priority  investments(49)  have  been 
identified to enhance research and innovation capacities and the uptake of advanced technologies, 
and  in  particular  to  strengthen  innovation  performance  and  foster  productivity  growth  by  identifying 
smart specialisation areas on the basis of national and regional needs and potential to:  

 

increase  attractiveness,  efficiency  and  competitiveness  of  the  research  and  innovation  system, 
supporting  consolidation  and  sustainability  of  the  whole  research  system,  notably  stabilisation  of 
infrastructure  and  creating  incentives  for  attracting  and  retaining  qualified  researchers  in  the  smart 
specialisation areas;  

  capacity building to enhance cooperation between the business and academia, mobilising knowledge 

and technology transfer and strengthening research capacities in industries; 

  support a transnationally and/or macro regionally co-ordinated research and innovation funding;  

  support small and medium sized enterprises internationalisation to grasp new business opportunities 

related to the digital, carbon-neutrality, resource efficiency and circular economy transitions; 

 

foster  business  investment  in  research  and  innovation  and  enhance  networking,  cooperation  and 
exchange of experience between academic researchers and companies. 

In digitalisation, there is still a significant gap between Slovakia and the EU average. Investment needs 
are identified to reaping the benefits of digitisation for citizens, companies and governments, and in 
particular to: 

 

 

increase  the  information  and  communications  technology  uptake  in  small  and  medium  sized 
enterprises, including supporting infrastructures and services; 

increase the quality and effectiveness of e-service provision taking into account regional differences 
and prioritising regions lagging behind; 

  cooperate with neighbouring countries in developing mutually recognisable e-services. 

Small  and  medium-sized  enterprises  are  not  the  moving  force  of  the  Slovak  economy  and  smart 
specialisation is still at its beginning. High priority investment needs are identified to  enhance growth 

(48)  This Annex is to be considered in conjunction with the Proposal for a Regulation of the European Parliament and of the Council 
on the European Regional Development Fund and on the Cohesion Fund COM(2018) 372 and the Proposal for a Regulation of 
the  European  Parliament  and  of  the Council  on the  European  Social  Fund  Plus  COM(2018)  382, in particular  as  regards  the 
requirements for thematic concentration and urban earmarking outlined in these proposals. 

(49)  The intensity of needs is classified in three categories in a descending order – high priority needs, priority needs, needs. 

61 

 
 
                                                           
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for SLOVAKIA 

and competitiveness of small and medium-sized enterprises, in particular to: 

  support companies to move up in global value chains, increase productivity, facilitating participation 

in industry led and research driven international clusters; 

  enhance the research and innovation capacities of small and medium sized enterprises by supporting 
development  and  implementation  of  new  business  models,  adoption  of  new  and  emerging 
technologies and provision of advanced business services to small and medium-sized enterprises. 

Labour  shortages  lead  to  growing  skills  mismatch.  High  priority  investment  needs  are  identified  to 
develop skills for smart specialisation, industrial transition and entrepreneurship, in particular to: 

  provide  enterprises  and  research  institutions  with  tools  to  adapt  and  develop  skills  for  smart 

specialisation, industrial transition and entrepreneurship; 

 

 

training  and  reskilling  for  smart  specialisation  areas  at  all  levels  within  small  and  medium  sized 
enterprises  and  building  the  necessary  administrative  capacity  with  a  special  attention  to  digital 
skills;  

improve the practise-based approach in vocational education and training, higher education system, 
supporting the linkages between schools and enterprises also taking into account the lessons learnt 
from the Catching-up Regions Initiative in Prešov region. 

Policy Objective 2: A low carbon and greener Europe  – Clean and fair energy transition, green 
and blue investment, circular economy, climate adaptation and risk prevention 

Slovakia  faces  numerous  challenges  in  its  transition  to  resource-efficient,  low  carbon  economy  with 
significantly reduced air pollution, being one of the highest energy intense economies in the EU. High 
priority  investment  needs  are  identified  to  promote  energy  efficiency  measures  and  renewable 
energy, as well as to develop smart energy systems, grids and storage at local level, in particular to: 

 

improve  energy  efficiency  in  public  and  residential  buildings  and  small  and  medium  sized 
enterprises; 

  support  deployment  of  decentralised  small-scale  renewable  electricity  capacities  and  support 

transition to renewables in heating and cooling, in line with sustainability criteria; 

  decrease  greenhouse  gas  emissions  and  air  pollution  by  replacing  fossil-fuelled  boilers  with  low 
carbon intensive installations accompanied by energy efficiency renovation of buildings, particularly 
in structurally affected regions and for low-income households with appropriate measures; 

  deploy solutions for smart electricity distribution  grids and  storage  – linked to demand and supply 

planning on local level. 

Slovakia continues to suffer from draughts, floods and flood-induced damages for the economy and the 
infrastructures. High priority  investment  needs are  identified to  promote climate change adaptation, 
risk prevention and disaster resilience, in particular to: 

  address  risks  as  identified  in  the  national  risks  assessment,  as  well  as  by  the  cooperation  with  the 

neighbouring countries with the focus on prevention measures and nature-close solutions. 

62 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for SLOVAKIA 

Water quality and waste water treatment standards continue to be a challenge. Priority investment needs 
are identified to promote sustainable water management, in particular to: 

 

improve  access  to  drinking  water  supply  following  the  water  hierarchy  including  water  access  for 
marginalised groups and remote localities; 

  waste water treatment (with focus on stringent treatment);  

  measures improving the status of water bodies. 

Slovakia  is  at  risk  of  not  meeting  waste  management  targets.  High  priority  investment  needs  are 
identified to transition to circular economy, in particular to: 

  support measures leading to the transition to circular economy and shifting towards more prevention, 

reuse, and recycling of waste. 

More  than  half  of  habitats  and  species  are  in  unfavourable  status.  Priority  investment  needs  are 
identified  to  enhance  biodiversity,  green  infrastructure  in  the  urban  environment,  and  reducing 
pollution, in particular to: 

  de-contamination and rehabilitation of industrial sites; 

 

tackling the landscape fragmentation and urban sprawl; 

  support measures leading to improved air quality and its monitoring. 

Policy  Objective  3:  A  more  connected  Europe  –  Mobility  and  regional  Information  and 
Communications Technology connectivity 

Connectivity  gaps  remain  regarding  the  completion  and  modernisation  of  road  and  rail  transport 
infrastructure  as  well  as  the  levels  of  road  safety.  High  priority  investment  needs  are  identified  to 
develop a sustainable, intermodal Trans-European Transport Network, and in particular to: 

  complete the core and comprehensive Trans-European Transport Network railway and road network 
(including cross-border sections) and remove regional disparities in road Trans-European Transport 
Network accessibility; 

  modernise  the  Trans-European  Transport  Network  railway  network  and  complete  the  Trans-

European Transport Network multi-modal corridors; 

 

reduce environmental impact and improve safety of transport. 

Priority  investment  needs  are  identified  to  develop  sustainable,  intermodal  national,  regional  and 
local mobility, as well as to promote sustainable multimodal urban mobility, in particular to: 

 

investment  into  regional  and  local  mobility  addressing  negative  externalities  from  transport,  for 
instance  supporting  multimodality  in  the  transport  sector,  making  the  whole  sector  more 
environmentally friendly, safer, and cost-effective; 

  promotion  of  sustainable  and  efficient  urban  transport  systems  (as  part  of  the  relevant  integrated 
territorial  development  strategies,  or  based  on  sustainable  urban  mobility  plans),  particularly  in 

63 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for SLOVAKIA 

cities.  

Investment needs are identified to enhance digital connectivity, in particular to: 

  development of a reliable national broadband strategy and increasing capacity of authorities involved 
in  this  sector  as  well  as  measures  for  investment  mappings  on  which  basis  very  high  capacity 
broadband networks can be deployed. 

Policy Objective 4: A more social Europe – Implementing the European Pillar of Social Rights 

Shortages are recorded in some occupations, yet unemployment remains high in some areas, and there is 
a need to cope with new economic developments. High priority investment needs are therefore identified 
to  improve  access  to  quality  employment  of  all  jobseekers,  enhance  the  effectiveness  of  labour 
market  institutions  and  services,  promote  women’s  participation  and  support  adaptation  of 
enterprises and workers to change, including through social innovation and infrastructure, and in 
particular to: 

  support  the  labour  market  integration  of  long-term  and  non-registered  unemployed  and  inactive 

persons, including the young  people who are neither in education, employment or in training; 

  support the assessment and anticipation of skills needs and ensure timely and tailor-made support to 

labour market matching, transition and mobility; 

  provide tailor made upskilling and reskilling, including validation of prior learning, and incentivise 

investment in training by enterprises; 

  promote establishment of social enterprises; 

  enhance gender equality in the labour market, notably by accessible childcare for children under 3; 

  promote equal opportunities and active participation of migrant workers in society. 

The  outcomes  of  the  education  and  training  system  are  low  and  reveal  significant  regional  and  socio-
economic disparities. High priority investment needs are therefore identified  to promote equal access 
to  quality  and  inclusive  education,  training  and  life-long  learning,  and  to  improve  their 
effectiveness and labour market relevance, including through infrastructure, and in particular to: 

 

increase the participation of children in early childhood education and care; 

  promote equal access to and support completion of quality and inclusive education and training, in 

particular for disadvantaged groups, such as Roma; 

  enhance  work-based  learning,  excellence  and  internationalisation  in  vocational  education  and 

training, as well as in higher education; 

 

increase the attractiveness of teaching professions by improving working conditions and investing in 
training. 

Poverty  and  material  deprivation  continue  to  be  high  in  a  number  of  localities  and  the  overall 
performance of social services and healthcare system are suboptimal. High priority investment needs are 
identified  to  enhance  equal  and  timely  access  to  quality,  sustainable  and  affordable  social  and 

64 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for SLOVAKIA 

healthcare services, including through infrastructure, and in particular to: 

  ensure access to healthcare systems across the country, particularly for vulnerable groups, notably in 

prevention and primary care, with a view to reducing health inequalities; 

 

improve  accessibility  of  long-term  care  services  for  the  elderly  and  promote  active  and  healthy 
ageing; 

  address shortages in the number of medical occupations, taking regional disparities into account; 

  support integrated active inclusion measures, including through outreach and personalised services, 
to  disadvantaged  people,  including  providing  food  and  basic  material  assistance  to  the  most 
deprived; 

  support  the  transition  from  institutional  care  to  community-  or  family-based  services  for  persons 

with disabilities, as well as for children in state institutional care; 

  prevent and reduce homelessness and housing exclusion, including through social housing; 

  ensure the necessary support to and attractiveness of social worker professions. 

Poverty, social exclusion and limited provision of essential services are particularly prominent in south-
eastern Slovakia, strongly affecting the marginalised Roma communities. Priority investment needs are 
identified to promote socio-economic integration, including through infrastructure, in particular to: 

 

increase the access to mainstream public utilities and inclusive social housing; 

  address  the  barriers  in  access  to  education,  employability,  health  and  housing,  with  a  view  of 

inclusion of marginalised citizens. 

Policy Objective 5 –  A Europe  closer  to  citizens  by  fostering  the  sustainable  and  integrated  
development  of urban, rural and coastal areas and local initiatives 

Given the inter-regional as  well as sub-regional disparities within the regions in Slovakia, place based 
strategies and instruments remain highly relevant in addressing the bottlenecks to growth and cultivate 
the unique potential of regions concerned. Investment needs are identified to fostering the integrated 
social,  economic  and  environmental  development,  cultural  heritage  and  security  in  urban  areas 
and in rural areas, in particular to: 

 

investments in selected functional areas based on their integrated territorial development strategies, 
addressing  their  specific  challenges  in  a  sustainable  and  smart  way  while  reinforcing  the  role  of 
regional  capitals  beyond  their  functional  area  –  university  towns,  places  of  science,  research  and 
innovation; 

  strengthen the partnership principle intra and inter-regionally and investing in capacity building and 

empowerment for local authorities and grass-root organisations; 

 

invest  in  rural  areas  lagging  behind  by  addressing  their  infrastructure  gap  and  other  identified 
development  needs,  consider  the  depopulation  of  certain  less  developed  areas  (such  as  ‘hunger 
valleys’ in south and east of the country) and provide opportunities to population to be able to boost 
local growth benefitting from the linkages with the surrounding urban areas; 

65 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for SLOVAKIA 

  build up on the specific territorial expertise acquired during the Catching-up Regions Initiative and 

Coal regions in Transition Initiative. 

Factors for effective delivery of cohesion policy 

 

improved  and  more  efficient  measures  to  prevent  and  address  conflict  of  interest,  fraud  and 
corruption; 

  strengthened  administrative  capacity  based  on  development  and  implementation  of  roadmap  on 
administrative  capacity  building  necessary  for  the  effective  administration  and  implementation  of 
cohesion  policy  Funds  and  to  foster  effective  cooperation  across  government  sectors,  and  among 
local, regional and national levels;  

  simplified  processes  and  enhanced  transparency  in  the  management  of  cohesion  policy  funds  and 

reduced administrative burden for beneficiaries;  

  strengthened capacity of beneficiaries to prepare and implement quality projects and to participate in 

the implementation of the funds in line with the partnership principle; 

 

improved  public  procurement  performance,  in  particular  in  the  areas  of  internal  controls, 
transparency, digitisation, professionalisation, single bidding and strategic public procurement; 

  broader  use  of  financial  instruments  and/or  contributions  to  a  Slovakia’s  compartment  under 

InvestEU for revenue-generating and cost-saving activities. 

66 

 
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