Scholarly record

ANALYSIS OF THE IMPACT OF FOREIGN DIRECT INVESTMENTS ON GDP AND EMPLOYMENT IN THE SLOVAK REPUBLIC

I. Hajduchova, B. Giertliova, M. Jankovsky, R. Sulek

Abstract

Direct relationship of the development of foreign trade and FDI was confirmed by a correlation analysis. The coefficient of correlation was 0.97. A strong relationship (R=0.97) showed between the turnover of foreign trade and GDP, as well as between the share of export and GDP, and the share of import and GDP, where the coefficient of correlation reached the value of 0.99. The GDP growth rate indirectly affected the unemployment growth rate. The relationship between these parameters was weak, as the coefficient of correlation is at -0.23. A negative correlation was seen in the relationship between the unemployment growth rate and the export and import growth rate. The relationship was also weak, with coefficient of correlation at -0.27. This could be caused by the dependency of Slovak economy on raw material import and in case the import increased, employment increased, domestic consumption increased, and export decreased as well as the fact that Slovakia exports not only finished products but also raw materials (round wood), or products with lower added value (construction sawn wood), which create only minimum job opportunities. The higher values of the negative correlation of -0.73 showed between the change of the state of foreign direct investments and the change of state of unemployment. This proves the multiplicative effect of investments, which shows that when investments are expended efficiently, they cause a more rapid growth of the GDP and lowering the unemployment. Attracting more investors to Slovakia could be a possible solution to cope with recession.

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