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.
Slovakia Country Risk
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 party another outright parliamentary majority, but the fragmented nature of the opposition suggests it will remain the dominant political force for some time.
Although Slovakia has been released from the European Commission's Excessive Deficit Procedure, the government will have to maintain a relatively tight fiscal stance in light of looming constitutional debt brakes. However, 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...
Slovakia Operational Risk Coverage (9)
Slovakia Operational Risk
Slovakia Operational Risk
Slovakia Crime & Security
Slovakia Crime & Security
Slovakia Labour Market
Slovakia Labour Market
Slovakia Trade & Investment
Slovakia Trade & Investment
Slovakia Industry Coverage (16)
In 2014, we estimate total vehicle sales increased 9.4% 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 3.7% due to continued growth in both the passenger car and commercial vehicle (CV) segments, as these dynamics continue to drive new purchase decisions.
BMI believes that passenger car production in Slovakia increased 3.7% in 2014, and we forecast 4.6% growth 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...
Defence & Security
Slovakia Defence & Security
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...
Food & Drink
Slovakia Food & Drink
We forecast Slovak real GDP to expand by 2.8% and 3.2% 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.
Slovakia Freight Transport
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...
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.
BMI View: As one of the wealthier countries in the Central and Eastern Europe (CEE) region, 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.
Our Country Risk team forecast Slovakia to be one of the strongest performing economies in the eurozone...
Slovakia Medical Devices
BMI View: We forecast limited growth opportunities in Slovakia's mining sector as weakness in gold prices prevents the take-off of the gold sector. Coal will remain the mainstay of the country's mining industry over our forecast period to 2018. Even so, growth in coal output will be subdued.
We expect Slovakia's mining industry to undergo modest growth in value, reaching USD0.41bn in 2018, from USD0.38bn in 2013. Coal will remain the mainstay of the sector as gold mining fails to make significant gains as a result of weak global gold prices delaying project development as miners slash capital expenditure.
Over the long term we maintain that gold mining holds promise. New exploration activities for gold have been launched, which are attracting foreign investment namely from Cyprus-based EMED Mining and Canadian company Tournigan...
Oil & Gas
Slovakia Oil & Gas
BMI View: Slovakia has above-average energy import dependency compared with the regional average. The country remains dependent 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.
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....
Pharmaceuticals & Healthcare
Slovakia Pharmaceuticals & Healthcare
BMI View: In 2014, almost 2.47% of the country's GDP was spent on pharmaceuticals, as combined sales of prescription drugs and over-the-counter medicines - sold through pharmacies and hospitals at consumer prices - reached EUR1.85bn (USD2.46bn). Although total pharmaceutical and healthcare spending showed only modest growth of 2.5% and 1.9% respectively year-on-year in local currency terms, our long-term projections are more optimistic. Slovakia continues to be an attractive pharmaceutical market for large multi-nationals because it generally offers significant potential as a location for pharmaceutical research.
Headline Expenditure Projections
Pharmaceuticals: EUR1.85bn (USD2.46bn) in...
Overall power generation is forecast to decline by 2.6% in 2015 to 25.0TWh due to a fall in the generation of electricity from coal and hydropower, and a slight dip in power produced from oil and natural gas. Over the next decade, however, generation will increase by nearly 30%, mainly as a result of an expansion of nuclear power. We do not foresee any rise in consumption in 2015 and 2016, but demand will pick up in the second half of the decade, driven by a steady expansion of the manufacturing sector.
Key Trends And Developments
The government is emerging as the most likely buyer of Enel's 66% share in Slovenske elektrarne. In February, the government announced plans to sell its stake in Slovak Telekom, which is worth EUR1bn, allowing it to buy the 17% of shares in SE needed to give it a majority stake. Other shares would go to...
Slovakia Real Estate
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...
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.
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....
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...