The economic development of the Czech Republic and Slovakia after the split of former Czechoslovakia in 1993 shows some important differences, caused by different economic policy and the starting level. The convergence of the Slovak economic level to the Czech one was very fast after the World War II, due to the massive reallocation of resources (the transfer of resources in favour of Slovakia represented 11 % of the Slovak GDP). The Slovak economy adjusted to the lower economic level after the split by sinking real wages and by depreciation of the Slovak koruna, so that the ULC are now the lowest among the Central European countries. Slovakia enjoyed very fast growth of GDP in recent years fluctuating from 7 to 10 %, while in the Czech Republic it reached from 6 to 7 %. The abundant inflow of FDI and economic reforms helped to speed the real convergence in Slovakia, which continued fluently after a deep fall accompanying the split of Czechoslovakia. In 2007, the Slovak GDP per capita measured in PPS reached 84 % of the Czech one. The common challenge for both economies is to overcome the one-sided orientation on cost/price competitiveness based on low wages and pass over to the qualitative competitive advantage, based on the innovations and production of high quality goods and services.
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Article provided by University of Economics, Prague in its journal Politická ekonomie.
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Find related papers by JEL classification: E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation F15 - International Economics - - Trade - - - Economic Integration F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
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