Our comprehensive assessment of Slovakia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Slovakia, as well as the latest industry developments that could impact Slovakia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Slovakia before your competitors.

Country Risk

Slovakia Country Risk

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Core Views

  • Prime Minister Robert Fico's failed bid for the presidency in March 2014 is a sign of growing voter wariness of single-party rule and mainstream political parties, while recent corruption scandals have reinforced this trend. General elections in 2016 are unlikely to give the ruling centre-left Smer party another outright parliamentary majority, but the fragmented nature of the opposition suggests it will remain the dominant political force for some time.

  • Although the government will have to maintain a relatively tight fiscal stance in light of looming constitutional debt brakes, we believe Slovakia is on a sustainable fiscal trajectory with few risks to its solid sovereign credit profile.

  • The short-term economic outlook has brightened as export growth led growth of the previous years has translated to a visible pick-up in...

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Slovakia Operational Risk Coverage (9)

Slovakia Operational Risk

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BMI View: Slovakia is an attractive option for investors in Emerging Europe. The country benefits from a strong strategic location and, though lacking in maritime connections, shares extensive road and rail connections with key trading partners in Europe. The country is welcoming to foreign investment, with few restrictions on foreign ownership and excellent access to credit via a well developed banking sector. With a strong exports industry and growing demand for imported consumer products, Slovakia presents many avenues for growth. There are risks, however, in the form of a costly and limited labour market, high tax rates and ongoing allegations of corruption at high levels of the judiciary and government which hamper transparency in public procurement. Overall, therefore, Slovakia has a score of 60.4 out of 100 on the BMI...

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Slovakia Crime & Security

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BMI View: Slovakia's stable political and security environment presents relatively few risks for investors with regards to crime and security, as it is not the target of terrorist groups and has low levels of violent crime within its borders. The main threats to investors are associated with corruption and organised crime in the form of fraud and bribery, exacerbated by the perceived corruption within the Slovakian police force. Slovakia therefore receives a high score of 70.1 out of 100 in BMI's Crime and Security Risk Index, in sixth position out of 31 Emerging Europe states.

The main threat to businesses with regards to crime emanates from the risk of fraud and bribery. However, financial reporting and fraud detection are considered to be fairly robust. While...

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Slovakia Labour Market

Slovakia Logistics

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BMI View: Slovakia's Logistics Risk Index score reflects the potential benefits of the country's relatively well developed transport infrastructure network as well as the risks to investors caused by the high cost of electricity and substantial concerns surrounding water quality and availability. Overall, Slovakia sits roughly in the middle of the Emerging Europe pack, in 17th place out of 31 countries, with a Logistics Risk Index score of 52.2 out of 100...

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Slovakia Trade & Investment

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BMI View : Slovakia's free market economy and welcoming attitude to foreign direct investment (FDI) ensure that there are few regulatory restrictions facing foreign investors. The country boasts a number of opportunities in its manufacturing and consumer sectors, buoyed by economic growth which is expected to outperform eurozone peers. Access to financing is strong due to a stable banking sector which enjoys high levels of public trust and adequate capital buffers. However, corruption in all areas of government and uneven progress on bureaucratic reforms continue to pose risks...

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Slovakia Industry Coverage (16)

Autos

Slovakia Autos

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In 2014, we estimate total vehicle sales increased by 9% as the economy recovered somewhat, and volumes were boosted by pent-up demand in the market. In 2015, we forecast an increase in total sales of 3.9% due to continued growth in both the passenger car and commercial vehicle segments, as these dynamics continue to drive new purchase decisions.

BMI forecasts passenger car production in the country to increase 2.3% in 2015. This increasing output in Slovakia, and other Central and Eastern European (CEE) states more generally, can be seen in contrast to decreasing production levels in much of Western Europe as auto manufacturers strive to cut costs amid continuing economic uncertainty in the region. BMI believes that the Western European auto market will remain generally weak (certainly in volumes terms) in the short-to-medium term, and we expect auto investments in the region to dwindle, in...

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Commercial Banking

Slovakia Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Defence & Security

Slovakia Defence & Security

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Mixed messages were received from the Slovak Ministry of Defence during 2014 regarding the country's defence budget for this year. Initially, the government stated it would not be increasing its defence budget over the coming years. However, in September 2014, the government then pledged to increase its defence spending to 1.6% of gross domestic product by 2020.

Following many years of underinvestment, the Slovakian armed forces look set to benefit from a raft of new procurements, which have been announced by the government in 2014. The country has expressed an interest in leasing new multirole combat aircraft, with the possible acquisition of up to 12 aircraft from 2017. Additional planned purchases include new medium-lift utility helicopters in the same timeframe, with the delivery of two new turboprop freighters in 2017, while the country's land forces are to obtain new armoured vehicles.

We have given Slovakia an...

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Food & Drink

Slovakia Food & Drink

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We forecast Slovak real GDP to expand by 3.0% and 3.3% in 2015 and 2016 respectively, with domestic demand being the engine of growth. Slovakia's consumer price index (CPI) was in contraction for much of 2014 and falling oil prices mean that inflation will stay lower for longer into 2015. In contrast to some developed eurozone states, where falling prices and economic stagnation imply that deflation expectations could become entrenched and act as a major drag on growth potential, we see few risks of this pattern emerging in Slovakia. Instead, disinflation has supported consumption by contributing to rapidly rising real wages since mid-2013, a trend that has further to run in 2015. Rising real wage growth has coincided with accelerating consumer credit growth, rising consumer confidence and gradually improving labour market dynamics, which all bodes well for discretionary spending in the food and drink sector.

...

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Freight Transport

Slovakia Freight Transport

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In 2015, the growth of 12 months previous in the Slovakian freight sector is set to continue and be built on, following a poor 2013.This is despite the fact that Slovakia's economy faces significant headwinds in H214 (at the time of writing) from waning growth momentum in developed eurozone states, which does pose problems for Slovakia's freight mix going forward into 2015. Leading the way in year-on-year (y-o-y) growth terms in 2015 will be the inland waterways freight sector (3.75 %), slightly ahead of the road and air freight modes (3.45% and 3.40% respectively).

Geopolitical instability, weaker external demand and growing uncertainty over the macroeconomic climate will hurt private sector confidence and serve up downside risk for freight, not just in Slovakia, but in most countries in Europe. That said, we expect lending to remain relatively resilient despite these headwinds and continue to expect Slovakia to have among the fastest rates...

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Infrastructure

Slovakia Infrastructure

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BMI View: BMI has revised down its 2014 forecast for Slovakia's construction industry to -3.8% on the back of weak indicators across the industry. In the nine months to September 2014 construction output fell 3.2% year-on-year to EUR3.1bn, according to the Statistical Office of the Slovak Republic. 2015 should, however, see a return to positive growth (BMI forecasts 1.1%) driven by EU energy and transport integration projects and an improving economic picture. The infrastructure sector will remain the key driver for construction industry growth to the end of our forecast period in 2024, despite accounting for only 25% of the total construction picture, and while we forecast construction industry growth remaining positive throughout this period, it will be weak and will begin to slow after a high of 1.7% in 2017.

Key...

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Insurance

Slovakia Insurance

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BMI View: As one of the wealthier countries in the Central and Eastern Europe (CEE) region and strong growth in the forthcoming years, insurance penetration is relatively high compared with those of many neighbouring states, with the majority of Europe's major multinational insurers already present in the market. The counterpoint to this is that competition is high, meaning companies are struggling to achieve premiums growth as they succumb to pressure to keep prices low. To counteract this, both life and non-life insurance providers are focussing their strategies on improving distribution as well as increasing their range of products to reach new customers.

Slovakia's economic outlook is forecasted to see Slovakia as one of the strongest performing economies in the eurozone over 2015. The country has a solid growth outlook, external account surplus, relatively low public debt...

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Medical Devices

Slovakia Medical Devices

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BMI Industry View: We expect the Slovakian medical device market to grow by a CAGR of 3.9% over the 2013-2018 period, as the economy grows and health spending remains at a high level. Slovakia is heavily reliant on imported medical devices despite the presence of an established medical device industry. Health spending is high for the region, in per capita terms and as a percentage of GDP. If the government is successful in creating a single health insure...

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Mining

Slovakia Mining

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BMI View: Slovakia's mining industry is small relative to most other European markets. It is expected to remain as such through to the end of our 2015-2019 forecast period, with lignite production continuing to dominate overall output. Growth during this period will be undermined by the weakness in global commodity prices, which threaten to delay existing projects. However, we note longer-term growth potential in certain sub-sectors including gold and possibly uranium.

Slovakia's mining sector is currently one of the smallest in Europe,...

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Oil & Gas

Slovakia Oil & Gas

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BMI View: Slovakia has above-average energy import dependency compared with the regional average. The country remains reliant on Russia, but a recently announced EUR5.9bn EU infrastructure programme aims to allow for more flexibility when negotiating gas purchases and may boost supply.

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Headline Forecasts (Slovakia 2013-2019)
2013e 2014e 2015f 2016f

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Petrochemicals

Slovakia Petrochemicals

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BMI View: Uncertainty clouds prospects for the Slovakian petrochemicals market in 2015 following a year of growth, as the eurozone shows volatility that will affect domestic end-use industries such the car production. Meanwhile, an increase in low density polyethylene capacity (LDPE) is expected.

The Slovakian petrochemicals industry is small by international standards and largely fulfils domestic demand, although it has become more efficient and productive as a result of the consolidation of Slovnaft's petrochemicals operations into MOL and the implementation of a common single-channel polymer sales operation between MOL's TVK and Slovnaft.

...

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Pharmaceuticals & Healthcare

Slovakia Pharmaceuticals & Healthcare

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BMI View: Eurozone recovery and an improving domestic economic outlook will provide a boost to healthcare expenditure in Slovakia in the short-term. Over the longer term, we expect healthcare spending to accelerate given Slovakia's ageing population and burden of chronic diseases. With public finances on firmer footing and a centre-left government promising more generous social spending, multinational drugmakers and medical device companies can expect to see growth in revenues from Slovakia.

Headline Expenditure Projections

  • Pharmaceuticals: EUR1.85bn (USD2.46bn) in 2014 to EUR1.91bn (USD2.30bn) in 2015; +3.5% in local currency terms and -6.6% in US dollar terms.

  • Healthcare: EUR6.13bn (USD8.15bn) in 2014...

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Power

Slovakia Power

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Declining output from gas and hydropower plants and lacklustre demand growth will see Slovakian power generation decline in 2015. Over the next decade, however, generation will increase by nearly 30%, mainly as a result of an expansion of nuclear power. This will mean that Slovakia will become one of the few powerhouses in Europe, exporting up to 5.4TWh of electricity by 2024. Domestic consumption will also gradually increase, albeit at a much slower rate than the generation growth.

Key Trends And Developments

  • Italian firm ENEL received binding bids on May 9 and it has been reported that the state of Slovakia is interested in increasing its stake in the firm's local subsidiary Slovenske Elektrarne (SE). Meanwhile, Czech incumbent CEZ has decided to pull out from bidding for the Slovakian utility due to...

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Real Estate

Slovakia Real Estate

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BMI View: We are witnessing high levels of development in the commercial real estate market in Slovakia as strong internal demand supports growth in the high end retail segment, among others. However, activity in the commercial rental market remains more subdued as high levels of supply and an uncertain eurozone economy leads to caution and a lack of rental rate growth.

Slovakia's commercial real estate market has been one of the success stories of the post-communist era as economic expansion and significant growth in income levels and private sector spending have fuelled demand for modern commercial space. The Slovak economy grew by an annual average of 8.5% year-on-year (y-o-y) between 2005 and 2007, with a strong macroeconomic...

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Telecommunications

Slovakia Telecommunications

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Executive Summary

BMI View: The broadband sector is witnessing strong growth on the back of investments in next generation wireless and wireline networks and the demand for multiplay services. This will lead to the outperformance of telecoms service providers offering convergence services in volume and value terms.

Key Data

  • The mobile sector grew by 1.3% in 9M14, compared to a contraction of 0.8% during the same period in 2013.

  • The market weighted average ARPU fell by 1.4% in 9M14.

  • The fixed-line sector contracted by 2.4% in H114.

  • Mobile and fixed broadband subscriptions grew by 4.2% and 3.7% respectively in H114.

    ...

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Water

Slovakia Water

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BMI View: The Slovakian water sector is still in need of systemic investment, which presents opportunities for water infrastructure companies looking to become involved in Slovakia's underdeveloped wastewater and sanitation sectors.

We have expanded our forecasts this quarter to include a new datasets for the Slovakian water sector on water losses and households connected to the mains networks. We have also substantially revised our existing forecasts in the wake of the release of new historical data.

There has been little in the way of developments with regards to new projects in Slovakia. The current government focus is on improving water security and repairing flood damage, rather than on the development and modernisation of general water infrastructure. In particular, the incumbent government is...

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