The free market is the biggest driver of economic growth in our society. The development of international trade has had an unparalleled impact on the growth of the planet's total GDP. Where is it headed with its further development?
Vladimir Zalesky
(33) | Bratislava | CFO United Group
The last major change in this area was the end of the Cold War and the opening of trade relations between the West and the East. The result is also the enlargement of the European Union and the expansion of its free market. This had a positive impact not only on the new members, but also on the old ones. The "old" Europe had to deal with protectionist sentiments at home, as well as concerns about the employment of its citizens. However, the positive impact on companies, which at that moment received a supply of cheaper labor, is indisputable. Further loosening of barriers to the free movement of people and capital is necessary today and is one of the ways to increase efficiency in individual countries of the European Union.
Switzerland seems to be taking the opposite path. It is not yet clear how the country will deal with the results of the referendum and the restrictions on work for foreigners approved in it. The main question hangs over the bilateral agreement
between Switzerland and the EU. Abolition would not benefit either side. However, the most important thing is happening to the east of us. The occupation of the sovereign territory of Ukraine by foreign troops probably reminded many in our country of 1968. The situation is significantly different, but in the main points it is identical. The aggressor is the same country, and even the argument is again made by some kind of invitation, or rather, by protecting the inhabitants from bad Western influences.
What impact will this have on the economy in the future? It is difficult to predict exactly at this point. Past experience suggests that Europe will take a more accommodating (i.e. fearful) stance and nothing significant will happen.
It probably won't be long before the US either. The US leadership doesn't seem to be the strongest at making drastic decisions. And Russia knows it.
Of course, a military solution would probably be one of the worst. The diplomatic solution, which is currently being favored by all Western parties, has a chance of success, but it would need to proceed much more quickly.
and more forcefully than before (why does (not only) Slovakia still have its diplomat in Moscow?). It is therefore quite likely that the situation will lead to economic sanctions. However, politicians are mainly concerned about the impact it will have on the economy of "our" countries. Restricting trade with Russia is potentially the biggest risk to economic growth in the entire developed world. The impact specifically on the Slovak economy, which is oriented almost unilaterally towards car exports, would be catastrophic. Who would want to do that, right?
A second Cold War is probably not waiting for us, but the possible economic impacts of the current situation will probably be noticeable in the future and will affect both sides. The intended sanctions will be felt primarily by the European Union, which is more closely tied to Russia than the USA. Sanctions may limit intended and ongoing investments even at this moment before their implementation. There is an assumption that banks will not want to participate in financing projects in Russia at the moment. In Slovakia, the biggest economic issue is probably changes in tax laws. Specifically, the registration tax (so-called loss tax) and the electronic VAT return. Nothing positive is expected from the registration tax, other than a short-term filling of the state treasury. We assume that after the initial selection and cleaning of the market of dormant companies and a serious effort to do something about Slovakia's catastrophic unemployment, this measure will be canceled.
However, the electronic VAT return has the potential to significantly improve the functioning of tax collection. The main question remains whether the system will be able to work effectively even after several months and correctly match relevant invoices, and whether the state administration will treat all findings equally.
We recommend that all businesses be extra cautious when dealing with unverified clients. Initial reports from banks indicate an increase in fraudulent attempts, so it can be assumed that certain groups are looking for profits in other areas after the possibility of VAT fraud has become more difficult.