Even though Slovakia’s economy is faring well, it is lagging in various fields necessary for its further growth. This stems from the Country Report Slovakia 2019 issued by the European Commission.
While the EC praises the high economic growth and low unemployment rate, it is more critical of regional differences, the quality of public institutions, education, science and research.
Slovakia needs reforms
“In macroeconomic terms, the prognoses for the next years seem positive,” said Ladislav Miko, head of the EC Representation in Slovakia, as quoted by the TASR newswire, pointing mostly to the rise in the economy and employment.
However, Slovakia still lags behind the EU average.
“One of the outcomes suggests that the current model, based mostly on low salaries and the efforts to attract foreign direct investments, seems to be exhausted in relation to the convergence,” Miko continued, as quoted by TASR.
To catch up with the EU average, Slovakia needs to transfer to a different model that will require system solutions and structural reforms, he added.
The country’s progress will depend on the better quality of public institutions, the situation in education, the training of people and the adaptation to new conditions, particularly robotisation, IT and automation, according to Miko.
Challenges for the labour market
Buoyant revenues are helping to lower the budget deficit, while efforts to boost tax compliance continue, according to the EC.
“While progress has been made in reducing the non-payment of value-added tax, the effectiveness of tax compliance measures in reducing the high value-added tax gap remains to be seen,” the report reads. The tax gap remains one of the highest in the EU.
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.
The EC appreciated the Value for Money project and the low unemployment rate.
“The labour market is tightening further, exposing a number of structural challenges,” the EC warned.
It pointed to demographic trends and changing production methods that will require workers to adapt by investing in skills, as well as the rising number of unfilled vacancies, which requires the effective implementation of active labour market policies and rising intra-country mobility.
The EC pointed to the very high long-term unemployment rate, and also the low spending on active labour market policies, among the lowest in the EU.
The EC is critical over the weak quality and efficiency of public administration and wider business environment in Slovakia. Despite the efforts carried out within the Better Regulation Strategy (RIA2020), the 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,” the EC wrote in its report. “Corruption continues to pose a challenge, and organisational and procedural weaknesses at the police and prosecutor’s level, as well as weak whistleblower protection, hinder the fight against corruption."
Another challenge lies in improving the effectiveness of the justice system.
“While the overall efficiency has been improving, concerns over the perceived independence of the judiciary persist,” the EC wrote.
More funds on education and research required
While the EC praised several changes in education, it still remains critical of educational outcomes that are weak and worsening, and reveal significant regional and socioeconomic disparities.
Moreover, spending on education remains low and is reflected in low teachers’ salaries and poor learning equipment, including for digital skills.
The EC also pointed to low public spending on research and innovations, and pointed out that the use of critical EU funding for research and innovation remains inefficient.