Being an export champion is a poisoned chalice

Published on 20 December 2012 at 14:52

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“Slovakia is already producing too much for the world,” writes Pravda on its front page. Exports from the country now stand at 94 per cent of GDP, a ratio that makes Slovakia one of the highest-exporting member states of the EU after Malta, Luxembourg and Hungary, and one of the most open countries in the world in terms of trade, writes the newspaper. The Slovak economy is supported by the automotive sector. In 2012, 850,000 cars will roll off the production lines, or 157 per 1,000 inhabitants. The newspaper adds –

These two records should, in theory, be a cause for celebration. If we look closely, though, we find much food for thought there, for both records show a huge dependency and vulnerability in the economy.

The newspaper warns against the risk of becoming the "Detroit of the East" - a ghost town like those in the United States, if this single industry should one day disappear.

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Economists point out that Slovakia's economic growth is purely on paper: it does not reduce unemployment and does not fill up the state coffers. As the automakers benefit from low tax rates, and most of the production is exported, Slovakia does not benefit from taxes on the sales of the cars. The country is too dependent on trade and produces very little for the domestic market. Accordingly, Pravda notes,

there is no quick fix for reducing the exposure of the market. The only way forward is to create favourable conditions for local businesses and move to areas with higher added value.

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