Slovakia Infrastructure Report 2007

The construction industry in Slovakia continued to post phenomenal growth figures, adding 15.9% yearon- year (y-o-y) in the first three quarters of 2006. New construction works in the nation were up 22.2% yo- y while maintenance works grew 1.4%. However, overseas construction activities fell 22.9% and only accounted for 3.1% of the total construction industry value. Improved economic performance driven by strong foreign investment inflows has supported overall infrastructure development. Moreover, massive financial support by way of EU funds will foster a strong infrastructure platform for the future. BMI's newly released Slovakia Infrastructure Report 2007 forecasts an average construction industry growth of 10% for the forecast period of 2006-2010.

The automobile industry has been the star performer of the Slovak economy. Car manufacturing and resultant exports helped drive economic growth at 6.7% y-o-y in Q206. Slovakia is all set to become world's largest car manufacturer per capita by 2009. Major ongoing projects in the country include the US$1.28-bn Kia Motors car production plant. Further, reforms in taxation policies, labour laws, public administration and privatisation initiatives are aiming at attracting foreign investment. The EU allocation of SKK400bn (US$14.2bn) for Slovakia, of which SKK120bn (US$4.26bn) is to be directed towards transport infrastructure over the period of 2007-2013, falls short of the planned investment. The Slovak government has planned to inject SKK30bn (US$1.06bn) annually into motorway projects only during the same period. An amount of SKK3bn (US$106.5mn) annually would come from the state budget.

However, growth could face political roadblocks rising from the new government in power. Any attempt to alter the economic and social reforms process set in place by the previous government would have deep-rooted effects on economic growth. An illustration of the same is the rollback of the privatisation of Slovakia's biggest airport, the Bratislava International Airport. A previously approved sale of a 66% stake in the Bratislava and Koice airports was imperative to prevent collapse of services due to traffic pressures. The new government may slow down the deregulation process and lead to slackening of fiscal discipline only for the sake of differing in policy matters from the previous government.

Slovakia registers a composite score of 37, obtaining the first rank among its regional peers on BMI's Business Environment Rankings. Though most key reforms have already been implemented prior to the recent elections, the coming period would require sustained efforts for consolidation and fine-tuning. Low labour costs and falling rates of unemployment along with a skilled workforce would continue being the focal point of the industry. Despite future performance balancing on a tight rope of political agenda, economic outlook for Slovakia shows promise.