Real GDP growth is expected to slow to 0.8% in 2025 due to trade tensions, global uncertainty and fiscal consolidation efforts. In 2026, growth is projected to remain subdued at 1.0% as trade uncertainty persists and further fiscal consolidation weighs on domestic demand, while EU funds support investment. In 2027, real GDP is expected to pick up to 1.4% as exports regain momentum. Inflation is projected at 4.2% for 2025 due to the VAT hike and strong wage growth, while for 2026 it is set to remain elevated at 4.1% as a result of accelerating energy prices due to a more limited use of price ceilings, before moderating to 3.1% in 2027. The public deficit is projected at 5.0% in 2025, before decreasing to 4.6% in 2026 and subsequently increasing to 5.3% in 2027.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 0.8 | 1.0 | 1.4 |
| Inflation (%, yoy) | 4.2 | 4.1 | 3.1 |
| Unemployment (%) | 5.4 | 5.6 | 5.6 |
| General government balance (% of GDP) | -5.0 | -4.6 | -5.3 |
| Gross public debt (% of GDP) | 61.9 | 64.0 | 66.9 |
| Current account balance (% of GDP) | -5.1 | -5.2 | -5.0 |
Growth moderates due to export challenges and fiscal consolidation
Real GDP growth is expected to slow to 0.8% in 2025, supported by private consumption and investment. Following the strong trade activity in the beginning of the year, likely boosted by the frontloading ahead of the higher US tariffs, exports are expected to contract in the second half of 2025 due to the tariff implementation effects. Net exports are projected to contribute negatively to growth in 2025. Slovakia’s exposure to direct and indirect effects of tariffs remains high due to its strong reliance on exports, with its industrial sector underperforming in recent months. Private consumption growth is set to decelerate compared to 2024, affected by the VAT tax increase in early 2025 and high economic uncertainty.
For 2026, real GDP growth is projected at 1.0%, before increasing to 1.4% in 2027. In 2026, growth in private consumption is forecast to continue slowing due to fiscal consolidation. Public investment is forecast to remain strong amid economic uncertainties, supported by the deployment of EU funds and defence equipment purchases. Trade activity is expected to slow in 2026 under the impact of higher tariffs and subdued global demand, with Slovakia being exposed to the US market due to its sizeable automotive industry. As foreign demand picks up only slowly, export growth is expected to rebound in 2027, supported by the launch of a new automotive production factory. Private consumption growth is set to increase in 2027, although potential further consolidation efforts pose a downside risk to growth. A weaker economic performance of the country’s major trading partners poses another downside risk throughout the forecast horizon.
Resilient labour market amid economic pressures
In 2025, decreasing employment is set to be offset by a shrinking labour force resulting in the unemployment rate of 5.4%, marginally up from 2024. The labour market remains tight, as evidenced by high unfilled vacancies and robust labour demand in specific sectors, alongside a high influx of foreign workers. As of 2026, increased taxes, a planned reduction in public wages, and subdued trade activity are set to weigh on employment and income dynamics. As a result, the unemployment rate is projected to increase to 5.6% in 2026 and 2027. The growth in the compensation of employees is expected to slow down in 2026. With elevated inflation levels, real wage growth in 2026 is expected to be negative, returning to a positive trajectory in 2027.
Inflationary pressures set to rise, as energy price support is restructured
In 2024, headline inflation eased to 3.2%, partly reflecting continued government interventions to mitigate the effects of energy price increases for households, which were extended further into 2025. VAT and other tax increases included in the fiscal consolidation package, together with strong price pressures in services, led to an acceleration of inflation to a projected rate of 4.2% in 2025. In 2026, wage growth and services price pressures are expected to moderate, while energy inflation is set to pick up strongly in view of energy support mechanism adjustments. The technical assumption of the forecast is a full withdrawal of price ceilings for heating, and a partial withdrawal for gas and electricity. HICP inflation is thus set to remain at elevated levels of 4.1% in 2026, moderating to 3.1% in 2027, including the inflationary impact of the ETS2 roll-out, unless postponed.
Reduction of the public deficit driven by fiscal consolidation
In 2025, the general government deficit is expected to decrease to 5.0% of GDP, driven by consolidation measures such as adjustments to VAT and corporate income tax rates, along with the introduction of a financial transaction tax. In 2026, the deficit is projected to further reduce to 4.6% of GDP, as a result of a newly implemented consolidation package. However, in 2027, the deficit is forecast to rise again to 5.3% mainly due to increased public investments in defence expenditures and the national cofinancing of EU-funded projects.
The most significant expenditure-reducing measures in 2026 is a wage freeze in the public sector. Revenue-increasing measures include a more progressive personal income taxation, a halved VAT deduction for company cars used for private purposes, and an amnesty on historical tax arrears, which is expected to increase income tax revenue. At the same time, new expenditure-increasing measures, such as higher wages for teachers and prolonged energy subsidies, are likely to offset some of the effects of the consolidation measures.
The debt-to-GDP ratio for the government is predicted to increase from 61.9% in 2025 to 64.0% in 2026, reaching 66.9% in 2027, primarily due to the expected deficits.