30 years of independence: which country is more successful – the Czech Republic or Slovakia?

Although some people have not yet come to terms with the division of Czechoslovakia into two separate states, most appreciate the smooth division of the two countries and its role model effect. Even the actual division of the state, its assets and national currency was successfully carried out without major upheaval of the then fledgling financial markets. But where have the paths led the two separate countries since then?

After the division, each country took very different paths. Still, these paths crossed again in 2004 when they joined the European Union along with other countries. The Czech Republic chose the path of gradual integration right from the start and looked to the market principles of the “West” but stopped before the crucial step of adopting the euro. Slovakia initially gradually isolated itself with an adverse effect on the economy, living conditions and prosperity of the country. After bad experiences with international isolation, they subsequently plunged into integration with great enthusiasm. However, the euro was then preceded by unprecedented reform efforts under the baton of then Prime Minister Mikulas Dzurinda and his government, which are still looked upon with admiration and a little envy in the Czech Republic.

Thanks to extraordinary pro-reform efforts, Slovakia has managed to reverse the unfavorable development of the economy, which was accompanied by a decline in relative economic standing, double-digit unemployment, a weakening of the national currency and high inflation. In contrast, EU accession and subsequent reform efforts, culminating in the successful adoption of the euro, boosted the Slovak economy and attracted substantial foreign investment. These investments contributed to capital inflows, the modernization of the economy and the re-orientation of Slovakia towards Western markets. They even helped Slovakia surpass not only the Czech Republic, but the entire world in the number of cars produced per capita.

Mainly thanks to the market reforms – and less due to euro adoption – Slovakia began to catch up with the Czech Republic. Still, the initial gap was huge and according to World Bank data, GDP per capita in the Czech Republic was about 1.5 times higher than in Slovakia in 1993. Over time Slovakia managed to catch up though and in 2010 it was only about 1.15 times higher. However, the growth rate logically decreases with increasing wealth. In 2021, GDP per capita in the Czech Republic was still about 1.1 times higher. Thus, the Czech Republic maintains the lead in economic level (standard of living) among all countries of the former Eastern bloc, including Slovenia.

The price level in Slovakia has been approaching the "Western level" relatively fast compared to the pace of convergence of the country’s economic level, and even faster than in the Czech Republic with a permanently lower unemployment rate. While the average price level in the Czech Republic has increased by 350% since the split, in Slovakia it has increased by 430%. The faster growth rate of the Slovak average wages (roughly 710% compared to 680% in the Czech Republic) did not compensate for the increase in the cost of living for Slovak households.

Even during the global financial crisis, the Czech economy managed to surpass the living standards of both Portugal and Greece, which were mercilessly hit by their own debt crisis that infected the rest of the European Monetary Union. Moreover, in 2018, the Czech Republic also surpassed Spain's standard of living. In the 30 years since the Czech Republic’s independence, the standard of living of its citizens has almost tripled.

And the Czech Republic has managed to keep one more primacy for a long time – it has the lowest unemployment rate in the entire EU. Slovakia, on the other hand, occupied the lower ranks of European countries with one of the highest unemployment rates at the beginning of this millennium and again after the global financial crisis hit.

Nevertheless, both countries have come a long way in the last 30 years. Not only have they fully adapted to and integrated into estern democratic structures, but they have also ensured an increased standard of living and quality of life for their citizens. The standard of living in Slovakia has quadrupled compared to then, and in the Czech Republic it has almost tripled. The purchasing power of households has more than tripled in the Czech Republic (350%) and more than doubled in Slovakia (280%). The average life expectancy of Czechs has increased by more than five years, that of Slovaks by more than four years. Infant mortality in the Czech Republic has fallen by an incredible three quarters, in Slovakia by more than half.

The natural environment is also improving: energy consumption and carbon dioxide emissions have roughly halved in both countries. The two countries are also better educated – but in the Czech Republic, the number of university students has grown slightly faster. However, the Czech’s public debt relative to the size of the economy has risen sharply recently, albeit from lower levels (42 per cent of GDP in the Czech Republic and 63 per cent of GDP in Slovakia).

Both countries now face new challenges. Their dependence on the automotive industry, even more so for Slovakia, exposes both countries to the need for further economic transformation. The energy-intensive sectors, which still have a significant presence here, will also face challenges. The only way to increase the structural and therefore long-term sustainable growth of both economies is to develop modern economic sectors, diversify their customer supply chains, adapt education to the needs of modern times, encourage investment in modern and sustainable technologies, and deal with the aging population and the associated burden on public budgets.