Bratislava, Slovakia – According to the latest OECD Economic Outlook, released earlier this month, Slovakia is set to become the fastest growing developed economy in the world in 2019 and 2020.
The Organisation for Economic Cooperation and Development (OECD) forecasts that the Slovak economy will grow at a robust rate of 4.3% in 2019 and by 3.6% the following year, the highest GDP growth rate among OECD economies.
Trailing behind Slovakia, other fast-growing developed economies are Ireland and Poland (both 4% growth in 2019), Chile (3.7%), Estonia (3.5%), Hungary and Latvia (both 3.9%) and Slovenia (3.6%). But Slovakia’s growth rate still remains below the average growth of non-OECD economies (4.7%), whose significant expansion is powered by Asia’s economic powerhouses and world’s fastest growing economies like India (7.3% growth in 2019), China (6.3%) and Indonesia (5.2%).
The Czech Republic is the only Central European countries poised to face a relatively strong economic slowdown as of this year, as the OECD forecasts that the GDP will ‘only’ grow by 2.7% in 2019 and 2.6% in 2020 – compared to 4.5% in 2017.
Slovak Prime Minister Peter Pellegrini reacted to the release of the report saying that this confirmed previous forecasts about the good health of Slovakia’s economy: “Slovakia’s economic growth is balanced, and should continue to grow at a solid pace in 2019, with Slovakia belonging to the fastest-growing OECD countries”, the Prime Minister said.
According to the OECD report, “significant new capacity in the automotive sector”, most notably the arrival of British car-maker Jaguar Land Rover, “will boost export performance. Labor market buoyancy and solid investment growth, underpinned by favorable financial conditions and increased disbursements of EU funds, will contribute to strong domestic demand”. “Thanks to sustainable economic growth, living conditions in Slovakia are approaching those of higher-income countries”, OECD Secretary General Angel Gurría added during a press conference with Peter Pellegrini in Bratislava, one of the richest EU regions in terms of GDP per capita.
But the report also hinted to growing pressure on the labor market, a trend similar to the rest of Central Europe where relatively low unemployment, rising job vacancies and growing difficulties to fill open positions have pushed wages higher but are also seen as one of the main strains on businesses’ activity.
And as Volkswagen announced the first job cuts in one decade in Slovakia, analysts point to the fact that Slovakia’s business model and role in the global value chain will become more and more unsustainable.
The OECD also recommended that Slovakia invest more in innovation, up-skilling of its workforce and digitization of its factories “to ensure that Slovakia moves up the global value chain”. According to an OECD report from last year, Slovakia is the most vulnerable country in the world to automation, as factories increasingly seek to robotize their production lines.
The OECD also argues that policies have to ensure that growth is more inclusive and “shared by all, including the Roma”, who remain today disproportionately excluded from the official labor market and face strong discrimination in employment.