GDP is expected to expand by 1.5% in 2025, as Slovak export recovery slows down due to the direct and indirect effects of increased global protectionism, and government fiscal consolidation weighs on domestic demand. In 2026, GDP growth is expected to slow down to 1.4% as net exports decrease. Inflation is projected to increase to 4.0% this year due to increased taxes and higher wage growth, before moderating to 2.9% in 2026. The tight labour market is projected to keep real wage growth even though the economy is expected to slow down. The public deficit is expected to decrease to 4.9% of GDP in 2025 before increasing to 5.1% in 2026.
| Indicators | 2024 | 2025 | 2026 |
|---|---|---|---|
| GDP growth (%, yoy) | 2,1 | 1,5 | 1,4 |
| Inflation (%, yoy) | 3,2 | 4,0 | 2,9 |
| Unemployment (%) | 5,3 | 5,3 | 5,3 |
| General government balance (% of GDP) | -5,3 | -4,9 | -5,1 |
| Gross public debt (% of GDP) | 59,3 | 60,9 | 63,0 |
| Current account balance (% of GDP) | -1,6 | -2,3 | -2,5 |
Growth outlook balances export challenges with robust investments
Real GDP is expected to grow by 1.5% in 2025, mainly supported by private consumption and investment of EU funds and defence. Slovak exports recovered only mildly in 2024, and they are projected to remain sluggish in view of the rising trade restrictions and uncertainty. Although output in the Slovak automobile industry grew significantly, some exports were already suspended in response to the imposition of US tariffs. Export growth is therefore expected to moderate as of Q2 2025. While Slovakia is expected to continue expanding its exports, a weaker economic performance of the country’s major trading partners poses an important downside risk.
In 2025, private consumption growth is set to decelerate, affected by the VAT tax increase in the first quarter and economic uncertainty. However, steady wage growth keeping up with the rebound in consumer price inflation is expected to provide an extra stimulus to private consumption. Public investment is set to be strong, supported by the deployment of EU funds and defence equipment purchases. Net exports are no longer projected to contribute to growth as increases in imports are expected to outpace increases in exports. Overall, real GDP growth is projected at 1.4% in 2026.
The spending of RRF funds is set to increase in 2025 and 2026, supporting economic growth through public expenditure amid global economic uncertainties. Nevertheless, the potential need for further consolidation efforts poses a downside risk to growth in 2026.
Persistent low unemployment supported by robust labour demand
The unemployment rate is expected to stabilize at 5.4% in both 2025 and 2026 as slowing employment growth is set to be offset by a shrinking labour force. The labour market is expected to remain tight with record low levels of unemployment, highest unfilled vacancies and highest presence of foreign workers. Starting in 2025, the implementation of higher corporate income taxes and limited public sector wage increases are projected to slow down growth in compensation of employees. Nevertheless, the compensation of employees is still expected to grow faster than inflation over the forecast horizon, resulting in a slight increase in real wages.
Inflationary pressures set to rise, as energy price supports come to an end
In 2024, headline inflation eased to 3.2% due to continuing government interventions to limit energy prices for households which were extended into 2025. VAT and other tax increases included in the fiscal consolidation package led to an increase in prices in early 2025 that is set to be visible in annual inflation rates throughout 2025. Prices in the services sector, driven by strong wage growth, are expected to be the main driver of inflation. As a result, HICP inflation is forecast to rise to 4.0% in 2025, and to moderate to 2.9% in 2026.
Reduction of public deficit driven by fiscal consolidation
In 2024, the general government deficit increased to 5.3% of GDP due to the higher compensation of public employees, and higher spending in several social benefits, which were mostly of a permanent nature. The deficit is forecast to decrease to 4.9% in 2025, primarily driven by the fiscal consolidation package. Nonetheless, the consolidation efforts will be partially offset by the postponed delivery of military equipment from previous years. Permanent expenditure measures combined with worsening macroeconomic conditions, and the absence of new consolidating measures is expected to increase the deficit to 5.1% of GDP by 2026.
The most significant fiscal consolidation measures contributing to a decrease in public deficit in 2025 include adjustments to VAT and corporate income tax rates and the introduction of a financial transaction tax. While a reduction in public wage bill spending will contribute, its impact will be comparatively modest.
The government debt-to-GDP ratio is expected to increase from 59.3% in 2024 to 60.3% in 2025, reaching 63.0% of GDP in 2026. This rise is primarily due to significant deficits projected over the forecast period.