WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

In Slovakia GDP growth was mostly driven by: (i) external demand for motor cars; and (ii) improved cost- competitiveness (such as real depreciation and lower ULCs). However, the unemployment rate also rose and impaired the purchasing power of households. If current circumstances prevail, the GDP may continue to maintain its current rate of growth in the years to come. However, the current account deficit and public debt will also increase. The main challenges for the new centre-right government relate to fiscal consolidation (a general government deficit at 8% of GDP in 2010), high unemployment, cronyism and corruption, as well as coping with low R&D funding over the long term.