Slovakia

Slovakia exemplifies extreme export dependence as competitive advantage turned vulnerability—exports approach 100% of GDP, with automotive shipments dominating and causing above-average cyclical fluctuations. The automotive industry alone contributes 13% of GDP and employs 275,000 people directly and indirectly. GDP grew 2.1% in 2024, driven by household consumption benefiting from easing inflation and a stable labor market. However, 2025 projections vary from 0.8% (European Commission) to 1.7% (Allianz Trade) as trade tensions and tariffs on automotive exports reduce foreign demand. The October 2024 parliamentary consolidation plan aims to cut the deficit below 3% of GDP by 2027, from the projected 5.0% in 2025. Inflation at 4.2% for 2025 reflects a VAT hike and strong wage growth. Slovakia depends on continued EU support, with full Recovery and Resilience Plan utilization expected by 2026. The principal downside risk is rising protectionism in international trade, which could devastate not only Slovakia's automotive sector but ripple through the wider EU supply chain. Labor shortages, regional disparities, and external market dependence represent structural challenges. Diversifying beyond automotive manufacturing appears essential for long-term resilience, but decades of specialization have created path dependence that makes rapid transformation difficult—the industrial equivalent of a monoculture facing pest outbreak.