For Slovakia, the potential economic and developmental benefits of digitization can reach up to EUR 16.1 billion in additional gross domestic product by 2025. This corresponds to almost five times what the country plans to spend on education in 2018. Capturing these benefits would lead to increased global competitiveness and prosperity for the country’s 5 million people and allow Slovakia to join the most digitally advanced economies in Europe.
This video summarizes key insights from our report on opportunities of accelerated digitization in Slovakia and CEE region – “The Rise of Digital Challengers: Perspective on Slovakia”. (Video is in Slovak language)
Over the past 30 years, Slovakia has experienced rapid development (GDP per capita grew by 114 percent between 1996 and 2017). However, many of the drivers of this growth are beginning to lose their momentum. Significantly undercapitalised compared to more advanced European economies, Slovakia is experiencing a shrinking and increasingly more expensive workforce, with unemployment at relatively low levels (8.1 percent in 2017). With Slovakia’s working hours already above the EU average, there is a need to improve Slovakia’s productivity, which currently lags behind Western Europe. If Slovakia hopes to continue on its path to increased prosperity, it needs to redefine its growth strategy.
Our analysis shows that accelerating digitization and the convergence toward a tech-driven economy have a large potential to unlock the new growth engine that Slovakia needs so urgently, resulting in EUR 16.1 billion additional GDP. The size of the digital economy in Slovakia (at 5.9 percent of GDP in 2016) is trailing the CEE average of 6.5 percent, with a clear gap to Digital Frontrunner markets such as Sweden (9.0 percent). Even though the size of the Slovak digital economy is not far off the EU Big 5 average (6.9 percent), growth is stalling – between 2012 and 2016, the digital economy in Slovakia grew only by 0.7 percent per year, four times slower than in the EU BIG 5, indicating it still hasn’t gained significant momentum.
This report presents a perspective on Slovakia as part of a wider study “The rise of Digital Challengers: How digitization can become the next growth engine for Central and Eastern Europe” analyzing the opportunities for the digital economy in CEE. We consider Slovakia, alongside nine other markets in the region (Bulgaria, Croatia, Czech Republic, Hungary, Latvia, Lithuania, Poland, Romania, and Slovenia), to be a “Digital Challenger” with potential for accelerated digital economy growth. We compare Slovakia and the other Digital Challengers to a group of relatively small, highly digitized countries we refer to as “Digital Frontrunners”, namely Belgium, Denmark, Estonia, Finland, Ireland, Luxembourg, the Netherlands, Norway and Sweden.
For Slovakia to benefit fully from the digital transformation, we believe now is the time to act. To achieve the aspirational digitization scenario, Slovakia will have to count on all stakeholders - the government, business leaders and individuals. The public sector could integrate technologies to increase efficiency as well as improve the services provided for both companies and citizens. Companies will need to understand and embrace digitization opportunities, increase their adoption of digital tools and reskill their workforces to match new talent demands. For individuals, investing in lifelong learning for upskilling and reskilling will be the key to new labour market opportunities.
Technology is poised to fundamentally transform the Slovak labour market: Our analysis shows that up to 53 percent of workplace activities in the country today could be automated by 2030 using existing technology. This creates both a productivity increase opportunity and challenges related to transitioning the labour market to new job pools. Immediate action is needed to address these. Effectively navigating the transformation ahead requires a clear digital agenda.