The current state of the Slovak economy is a result of long‑term development. In the past, agriculture represented its most important component.
The first manufactures in the territory of present‑day Slovakia were established in the 18th century, while modern industry such as the wood processing industry, papermaking industry, and chiefly the flour‑milling industry started to develop in the 19th century.
After the creation of Czechoslovakia in 1918, Slovakia suffered from being a less developed part of the newly established republic. In Bohemia, Moravia, and Silesia, 39 % of the population was employed in industry, and 31 % in agriculture and forestry. In Slovakia, only 17.1 % of the population was employed in industry, and 60.4 % worked in agriculture and forestry. After the world economic crisis, armament companies, chemical works and footwear works were built. During the interwar period, Czech capital predominated in Slovak industry, taking advantage of cheap raw materials and low wages, which resulted in the growth of Slovak capital investment.
After WWII and the communist takeover in 1948, industry, transport and banks were nationalised and agriculture collectivised. In that period, the armaments industry, metal and heavy industry developed at the expense of traditional strengths in light and craft‑based industries, such as textiles, clothing, glass, and ceramics. The proportion of employment in industry and agriculture had gradually changed. While in 1948 agriculture in Slovakia employed 60 % of workers, at the beginning of 1980 it amounted to approx. 18 % of the economically active population.
In 1991, privatisation became a part of extensive changes in the economic environment. It was related to the liberalisation of prices; the achievement of the internal convertibility of the currency; the liberalisation of foreign trade; and the opening up of the country to foreign investors. The bulk of the industrial economy has been transferred to the private sector, including the key areas of machinery, chemical works, textiles, leather, shoes, glass, electronics, and car manufacturing. In 1999, Slovak state banks were privatised.
The agricultural sector, almost all of which is now privately owned, produces wheat and barley, corn, sugar beet, potatoes, fruit, vegetables, sunflower and livestock (cattle, pigs, poultry, sheep, and goats). However, its relative economic contribution (lower than 5 % of GDP) is not substantial.
Since 1998, the government has focused on macroeconomic stabilisation and structural reforms to build a base for long‑term prosperity. In addition, it has integrated the Slovak Republic with European and international organisations, such as the Organisation for Economic Cooperation and Development (OECD), which the country joined in 2000.
Fundamental tax reform was one of the most important initiatives of the Slovak government in the period 2002 – 2006. The reform introduced a flat rate to income taxation in 2004. A unified 19 % VAT rate was applied to all goods and services, although, since 1 January 2011, the VAT has been raised to 20 %.
The tax system faced a fundamental redesign with having progressive taxation introduced as of 2013. Currently, the 19 % tax rate is applied to private individual’s income not exceeding 176.8 times the current amount of subsistence minimum (including), and 25 % rate to income exceeding 176.8 times the current amount of subsistence minimum (equal to 37,981.94 € in 2021 with the subsistence minimum equal to 268.88 €/month since 1 July 2023. For legal entities, the rate is 21 % of the tax base net of tax loss. The volume of the Slovak gross domestic product amounted to 107.7 billion € in 2022.
Export revenues in Slovakia are increasing, mainly because of export to other EU countries. There is a sustained tendency toward growth in foreign direct investments and Slovakia offers many opportunities for domestic and foreign investors. The strongest position is currently held by the automobile industry and its subcontractors (Volkswagen, Peugeot‑Citroën, Kia Motors, Jaguar Land Rover). Export of motor vehicles (cars), electronic equipment or petroleum oils is dominant.
The unemployment rate was 6.1% in 2022.