GDP is expected to expand by 2.2% in 2024, supported by strong government consumption and recovering exports. In 2025, as tax increases and government consolidation weigh on domestic demand, it is forecast to only slightly edge up to 2.3%. In 2026, growth is expected to increase to 2.5%. Inflation is projected to moderate to 3.1% this year, before accelerating to 5.1% in 2025 due to the withdrawal of energy subsidies and increased taxes, and to stabilise at 3% in 2026. Amid the tight labour market, real wages are set to pick up. The public deficit is expected to increase to 5.8% of GDP in 2024 before decreasing to 4.7% in 2025, owing to the phase-out of energy-support measures and the consolidation of public finances, and to 4.1% in 2026.
| Indicators | 2024 | 2025 | 2026 |
|---|---|---|---|
| GDP growth (%, yoy) | 2,2 | 2,3 | 2,5 |
| Inflation (%, yoy) | 3,1 | 5,1 | 3,0 |
| Unemployment (%) | 5,5 | 5,3 | 5,1 |
| General government balance (% of GDP) | -5,8 | -4,7 | -4,1 |
| Gross public debt (% of GDP) | 58,9 | 59,8 | 61,8 |
| Current account balance (% of GDP) | -1,3 | -2,0 | -1,4 |
Growth outlook balances export challenges with robust investments
Real GDP is expected to grow by 2.2% in 2024, on the back of an increase in private and public consumption. Slovak exports increased significantly in 2024, albeit at a slower pace than imports. Slovakia is recovering its previously lost market share by also expanding outside of the EU. Exports are expected to accelerate, resulting in a stronger growth of positive net exports in 2026. However, the weaker economic performance of the country’s major trading partners is still an important risk.
In 2025, private consumption is set to be negatively affected by the VAT tax increase and the expiration of energy subsidies for households. However, continuing wage increases are expected to provide an extra stimulus for private consumption. Private investment is projected to be robust due to continuing investment in export industries. Public investment is set to be strong, supported by the deployment of EU funds and defence equipment purchases. Net exports are expected to contribute strongly to growth in 2026 as demand in the main export destinations stabilises. Overall, real GDP growth is projected at 2.2% in 2024, 2.3% in 2025 and 2.5% in 2026.
Persistent low unemployment supported by robust labour demand
The unemployment rate is expected to continue declining, from 5.5% in 2024 to 5.3% in 2025 and 5.2% in 2026. The labour market remains tight because of strong labour demand and a wave of early retirements. The labour force keeps declining despite an increase in the participation rate of previously inactive workers and arrivals of foreign workers. Starting in 2025, the implementation of higher corporate income taxes and limited public sector wage increases could slow down wage growth. Nevertheless, the compensation of employees is still expected to grow faster than inflation over the forecast horizon, resulting in an increase in real wages.
Inflationary pressures set to rise, as energy price supports come to an end
In 2024, headline inflation eased to 3.1% due to continuing government interventions to limit energy prices for households. However, with these measures set to expire in 2025, energy prices are expected to rise towards market levels. Additionally, the consolidation package, which is set to be implemented in January 2025 includes an increase in VAT rates and thus directly affects consumers. Prices in the services sector are expected to grow dynamically, driven by wage growth. As a result, HICP inflation is forecast to rise to 5.1% in 2025, and to stabilise at 3% in 2026.
Reduction of public deficit driven by fiscal consolidation
The public deficit increased to 5.2% of GDP in 2023, as a result of energy support, permanent increases in public sector wages and social benefits. In 2024, the general government deficit is expected to increase further, to 5.8%, due to the higher compensation of public employees, and higher spending in several social benefits, which are mostly of a permanent nature.
In 2025, the headline deficit is projected to decrease to 4.7% on the back of the consolidation package, which includes higher VAT rates, new taxes on financial transactions and other types of taxes and fees. Expenditure-reducing measures, such as lower spending on the public wage bill, are set to contribute to the consolidation of public finances to a lesser extent. Despite a strong consolidation effort, the deficit is forecast to remain high in 2025 because of a postponed delivery of military expenditures. The delivered military equipment is expected to contribute to the decline of the deficit to 4.1% of GDP in 2026.
After decreasing to 56.1% in 2023, the government debt-to-GDP ratio is projected to increase to 58.9% in 2024, to 59.8% in 2025, and to 61.8% of GDP in 2026. This increase is set to be driven by high deficits over the forecast horizon, which are expected to be only partly offset by the growth of nominal GDP.