Vseobecna uverova banka : Strong foundations and close collaboration will secure Slovakia’s growth

12.09.2022 Strong foundations and close collaboration will secure Slovakia's growth

Infrastructure projects are key to Slovakia's economic recovery. Here's how VUB is helping to strengthen the supply chain to make them work.

Slovakia's recovery from the lows of the pandemic has been relatively good compared with other European Union (EU) countries. Growth in 2023 is predicted at 3.4%.

The country is a key automotive manufacturer and exporter and its cost-effective labour force have made it attractive to investors.

However, as with many places, the war in Ukraine is affecting industrial supply chains.

VUB, the second largest bank in the country, is working closely with companies across the infrastructure supply chain - from the extraction and production of aggregates (ALAS Slovakia) and the production of cement (CEMMAC and Považská cementáreň) to transportation - providing working capital alongside facility and investment financing.

The bank also has a significant relationship with the National Motorway Company, for whom it is providing a syndicated loan (with a consortium of banks), acting as an agent.

The National Motorway Company is one of the bank's biggest clients in terms of financing and the bank has a strong relationship with it on an almost daily basis. The bank also works with real estate companies and developers.

Slovakian companies are certainly starting to pay close attention to the circular economy and ESG (environmental, social and governance) principles. And so is the bank, says Juraj Kretík, relationship manager in VUB's department of domestic enterprises: "VUB wants to be a green bank - and so we strive to choose projects that are green and comply with ESG financing requirements.

"We are also able to finance projects - that, for example, cut the volume of CO₂ emissions - at a discounted rate."

Because the Slovakian market is quite small compared with construction markets in other EU member states, all the companies tend to know each other and the level of collaboration is good.

In the cement production industry, for example, there are only three companies across seven factories. "However, this means we are able to open the door for cooperation across sectors very easily," says Kretík, "and this is standard procedure in our department."

But the size of the market is also one of its weaknesses. "It can make a lot of big infrastructure projects difficult," says Kretík. "And this all goes hand in hand with our capability to draw EU funds for this purpose and means that construction companies often have to look beyond the country."

On the other hand, he says: "We have a really good location here. We're close to Poland, the Czech Republic, Hungary and, of course, Ukraine. We are members of the European Union and we have a good level of digitalisation in the construction market.

"We also have a very well-developed automotive sector," he says.

In fact, Volvo (which has said it's going to make only electric cars by 2030) recently announced it was opening a second factory in Kosice, Slovakia's second-largest city.

The plant is expected to produce around 250,000 electric cars per year and lead to the creation of 3,300 jobs. Construction is scheduled to begin in 2023, with production starting in 2026.

So the future looks promising - despite uncertainties around supply, workforce availability and questions around the rates of innovation. The government has intervened, offering subsidies to prevent companies from laying workers off.

Construction has risen by 1.9% year-on-year, according to figures from the Statistical Office of the Slovak Republic and construction output reached €1.1bn in total for the first quarter of 2022.

"I am optimistic about the future," says Kretík. "Though, of course, at the moment it's very hard to predict what that will hold."