“Slovakia’s new Government took office in March this year, exactly at the time COVID-19 hit,” says Peter Vrabel of the Legate law firm in Bratislava. “The Government consists of four parties – three of which are in the Parliament for the first time. Of course, the situation found them unprepared, so some mistakes naturally happened as a result of that. Overall, however, the response they had [to the Covid-19 outbreak] was quick and successful."
Vrabel says that the ultimate question, going forward, is the effect the crisis will have on the country’s economy. According to him, the anticipated outcome is “a drop of ten percent in GDP and an increase of unemployment up to 6.5 percent.” To some extent, he notes, this was unavoidable, but he credits the Government with doing what it could to limit the damage. “Of course,” he says, “the restrictions that were applied caused limitations to the economy – but the Government has introduced several packages aimed at helping it recover. Some tend to help the employees, while others focus on businesses, giving them the ability to pay their office rent for an additional year.”
In addition, he says, “a so-called temporary protection shield for business states that no one can initiate enforcement proceedings or bankruptcy against you and that a company can’t initiate bankruptcy even with a negative ballot. This last measure provides a financing line to all business entities in case they decide to go for a new facility loan, in which case the state guarantees 90 percent of the principal loan amount.”
On balance, Vrabel says, this is all to the good. “Even though these measures don’t cover all of the costs, they are still important and helpful, and they helped stabilize businesses that otherwise wouldn’t have survived.”
Slovakia is proud of its automotive industry, Vrabel notes, and it continues to operate smoothly. “Volkswagen has announced that it will be producing three new models in Slovakia in the near future, which, of course, is a very large investment,” he says. Other sectors, unfortunately, are not doing as well. “With regards to M&A, a lot of the investors postponed their investments, and they are waiting to see how the situation develops. We are generally suffering in almost all fields mostly because of Slovakia's open economy – meaning that we are almost entirely based on import and export. The fact that the supply chain was disrupted due to the pandemic means we are facing huge problems.”
Vrabel notes that, as Slovakia is particularly dependent on Germany, Germany’s dramatic economic decline is affecting Slovakia’s economy as well. “Still,” he says, “some sectors, like agriculture, have managed to work well even during the crisis. That is logical, though, because it’s not dependent on export, but mostly works locally, so it isn’t affected by the supply chain.”
Vrabel concludes that “the fact that people are not spending as much as they used to may lead to depression in all sectors.” He is particularly worried about a potential second wave of the pandemic, as he expresses doubt about “the country’s capabilities in terms of infrastructure, available devices, and medical teams to fight it.”