Premature stalling of the catching-up process in CEECs: The case of Slovakia

The slowdown in the catching-up process has attracted considerable attention, as it is a phenomenon observed in a real context. It has affected almost all CEE countries after the global financial crisis, but to an unequal extent. The article deals with the problem of stalling catching up with advanced economies from the Slovak perspective. It is a problem with broad links to all sectors of the economy as it affects business activity, public administration and households. The analysis is constructed as an explanatory case study (trying to present and explain the different trajectory of one economy compared to a set of similar ones), which relies on the insights of growth accounting. Its aim is to prove that (i) Slovakia experienced a more pronounced break in the convergence trend than the other CEE5 countries; and that (ii) the slowing factors were spread across all growth drivers used in growth accounting (capital, labor, total factor productivity). In the case of capital, there was a fall in the investment rate and a halt in the overcoming of the gap in capital deepening. In the case of labor inputs, there has been a shift from a labor force excess to a shortage. There has been a significant backwardness in the forces supporting total factor productivity (R&D, accumulation of intellectual property products, quality of regulation). The decline in the total factor productivity (TFP) dynamics has been identified in several studies as a causal factor in the convergence slowdown. And it is precisely in the forces supporting TFP that the most significant weaknesses are identified in the case of Slovakia.