A decade since Slovakia adopted the euro, a key European official has said that the country is an impressive example of how economic and institutional convergence can be achieved in a short space of time.
“The key ingredients of this success have been the country’s willingness to grasp the opportunities offered by EU membership and the adoption of the euro,” said Yves Mersch, a member of the executive board of the European Central Bank (ECB).
“Indeed, on the economic side fundamental institutional reforms allowed Slovakia to transition to a vibrant market economy and adopt a highly successful export-led growth model, which underpinned real convergence.”
Less than three decades since the collapse of communism, Slovakia has made a remarkable economic transition from a centrally planned economy to a market economy that is closely integrated into the European Single Market. Slovakia’s real GDP per capita, in fact, stands at just over 80 per cent of the EU average and almost 20 per cent of jobs depend on EU exports to the rest of the world.
“Fundamental reforms such as the establishment of a clearly defined system of property rights, effective economic law enforcement and institutions to curb fraud and anticompetitive behaviour were crucial in allowing Slovakia to operate in a market economy and to cope with competition and market forces,” Mr Mersch continued.
Euro adoption strengthened Slovakia’s macroeconomic institutions, contributing to a 12 per cent increase in Slovakia’s exports to the euro area.
In the long run, though, Mr Mersch warns that convergence with EU countries could slow and for the country to avoid the middle-income trap, it could be useful to develop new strategies focused on domestic innovation: more productive firms, more private capital and more skilled labour.