Pandemic has made Slovakia more attractive for investors, a survey shows

Investors perceive the government’s reform policy as a positive signal for the country.

Illustrative stock photoIllustrative stock photo (Source: Sme)

European investors in Slovakia expect economic recovery this year. At the same time, their satisfaction with local conditions has increased and a vast majority of them would invest in Slovakia again, results of a regular survey shows.

“The economic recovery is starting,” said Christian Kügerl, commercial counsellor at the Austrian Embassy, as cited in the press release. “However, investors are watching closely the political development.”

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The German-Slovak Chamber of Commerce and Industry (AHK Slowakei), the Slovak-Austrian Chamber of Commerce, Advantage Austria Bratislava, the Dutch Chamber of Commerce in Slovakia, the Swedish Chamber of Commerce in Slovakia, the French-Slovak Chamber of Commerce in Slovakia and the Italian-Slovak Chamber of Commerce in Slovakia conducted the regular business survey at the end of March and beginning of April. The survey polled 116 companies operating in Slovakia.

The fact that the survey was conducted at a time when Slovakia was still under a partial lockdown is reflected in the results. Only 8 percent of the respondents assessed the situation of the Slovak economy as good. Contrary to this, their expectations are more optimistic.

“Three out of 10 companies already see the light at the end of the tunnel,” said Peter Lazar, president of AHK Slowakei, as cited in the press release, adding that as much as 38 percent of the respondents count on better results in their own businesses later this year.

This positive trend is confirmed by other indicators: 40 percent of investors expect an increase in their total turnover; more than a quarter of companies clearly expect an increase in export (29 percent), investment expenditure (29 percent), as well as hiring new staffers (27 percent).

“These numbers bring us back to pre-crisis levels,” said Lazar. “The economic bottom of the crisis year 2020 is clearly behind us.”

Bouncing back

The survey shows that the pandemic has reduced pressure on the increase of wages while investors expect it will resume within some months. They continue to lack qualified labour. Thus, for almost 47 percent of respondents, the staff shortage is one of the biggest threats to their business within the next 12 months.

The survey paid special attention to the economic consequences of the Covid-19 pandemic. Based on the results, almost a quarter of companies (24 percent) have already achieved the turnover they had during the pre-covid period. This share should increase to over 40 percent by the end of the year. However, more than half of the companies will reach the pre-crisis level only in 2022 or later.

The long-term consequence of the crisis may be the transformation of global supply chains. In the survey, approximately one in two companies indicated that they were considering a partial replacement of existing suppliers or looking for new suppliers. They said the region of central and eastern Europe is the target region. Many investors even want to bet again on suppliers from western Europe.

“This result is in line with our conversations with German companies,” said Lazar. “Slovakia has obviously gained attractiveness as a procurement market for German companies.”

Kügerl confirmed the growing interest on the Austrian side.

“Companies want to expand or are looking for new business opportunities,” he said. “Interest in investing in Slovakia is growing again.”

Still an attractive locality

When assessing Slovakia as an investment locality, the respondents praised its EU membership, labour productivity and preparedness of employees for performance, payment discipline, availability and quality of local supplies as well as qualification of employees. The survey showed improvement in parametres for combating corruption, tax policy, construction of infrastructure and transparency of public procurement.

“The companies assess the government’s reform policy as a positive signal for the country,” said Lazar.

On the contrary, the respondents currently consider the political stability and predictability of the economic policy to be the biggest weaknesses of Slovakia as an investment destination.

The vast majority of the surveyed companies from Europe (83 percent) would choose Slovakia as the place for their investment today, which is the largest share since 2016. Slovakia, together with a pioneer in the field digitalisation – Estonia – ranked as the most attractive locality among the 20 potential investment destinations in central and eastern Europe.

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