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Traditional sources of growth are slowly depleting. Slovakia has developed rapidly in the last 30 years. Per capita GDP increased by 114% between 1996 and 2017.
If Slovakia approaches the level of digitization in the countries of Western and Northern Europe, it will bring back to it by 2025 an additional 16 billion euros of gross domestic product (GDP) per year. That is, for example, nearly five times the state's spending on education and training for 2018.
Slovakia would become one of the most powerful economies in Europe, taking advantage of the growth potential of the digital economy. This is the result of a study by McKinsey, the global consulting firm, "The Rise of Digital Trolleys – Point of View on Slovakia".
The end of GDP growth
As the authors of the study say, traditional sources of growth are slowly depleting. Slovakia has developed rapidly in the last 30 years. Per capita GDP increased by 114% between 1996 and 2017.
This is mainly due to the dynamism of exports, foreign investment, favorable labor costs and, finally, subsidies from European Union funds. But these growth resources are gradually reaching their limits.
According to Helena Šarkana, head of McKinsey Digital in Slovakia, her productivity is lagging behind the rest of Europe. GDP per hour worked is less than a quarter of the average of the EU's "Big Five" (Germany, Great Britain, France, Italy and Spain).
The advantage of cheap labor gradually decreases. The Slovak economy is undercapitalised – the basic capital per employee is about half that of these countries.
At the same time, there are negative demographic trends, birth rates, emigration or aging. According to the authors of the study, Slovakia needs a new engine of economic growth, which could be digitization.
We can catch up with the leaders
According to McKinsey, Slovakia has the potential to catch up with the "digital champions", including the Benelux countries, Scandinavia, Estonia and Ireland. The study points out that the main advantages of Slovakia are market openness, a high proportion of university graduates and wide accessibility to the digital infrastructure.
The Slovak digital economy accounted for almost 6% of total GDP in 2016 – a little less than for the digital champions, where it accounted for an average of 7% of GDP.
In addition to traditional companies that are beginning to invest in digitization, several successful technology companies such as Eset, Pixel Federation, Exponea and Sli.do have also developed in Slovakia.
Digitization will significantly change the character of the knowledge and skills needed by the population. "There are already technologies to automate up to 53% of professional activities in Slovakia.
That would represent up to 1.2 million jobs. Employment and overall productivity will depend on the readiness of the population and the structure of the economy. People will probably find work as they did in previous technological revolutions.
"Automation is therefore an opportunity to bring the economy to produce more added value," said Dan Svoboda, managing partner of McKinsey Bohemia and Slovakia.
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