OECD Economic Outlook, Volume 2025 Issue 2

Slovak Republic

Economic activity remains subdued, with real GDP projected to grow by 1.1% in 2026 and 1.8% in 2027. Trade will be sluggish as tariffs are lowering foreign demand. Accelerated absorption of EU funds will support investment, but heightened economic uncertainty and fiscal consolidation dampen capital formation. Escalating geopolitical tensions, higher trade barriers, future fiscal consolidation and slower-than-expected growth in the European automotive sector represent clear downside risks to the outlook.

Rebuilding fiscal buffers is necessary through credible multi-year adjustment plans that reduce expenditures and broaden the tax base. Improving the efficiency of public spending, including by strengthening project preparation and implementation capacity can improve the use of EU funds. Strengthening the rule of law, fighting corruption and raising trust in the judiciary system as well as improving the regulatory environment are essential to reduce uncertainty and spur growth. Better tertiary education and stronger incentives to participate in adult learning would help reduce skills shortages and help companies expand their business.

Economic activity is slowing

The flash estimate of real GDP indicated an increase of 0.3% (quarter-on-quarter) in the third quarter of 2025. Growth was likely supported by household consumption helped by rising real incomes. Investment (excluding housing) rose substantially due to the use of EU funds. Housing investment weakened and foreign trade slowed. Subdued business sentiment and low consumer confidence, alongside muted dynamics in manufacturing production and retail trade point to sluggish growth in the near term. Harmonised consumer price inflation fell to 3.9% in October 2025. The still high inflation rate is driven mainly by persistent services price growth (of 7.7%). Core inflation remained elevated at 5.4% in October. While the labour market has weakened with the unemployment rate rising slightly, real wage growth has continued to rise.

Slovak goods trade fell further in the third quarter and new orders remain relatively weak across industrial sectors. Following the agreement between the EU and the United States, the effective US tariff rate on automotive imports of 15% is lower than when first announced in April (27.5%). Yet, effective tariff rates are still substantially higher than at the beginning of 2025.

Slovak Republic

Source: OECD Economic Outlook 118 database; and OECD Prices Statistics database.

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Slovak Republic: Demand, output and prices

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Fiscal consolidation is underway

With a large projected fiscal deficit of 5.0% in 2025, the government presented its third consolidation plan in September 2025, passed by Parliament in October. The package aims to reduce the general government deficit to 4.1% of GDP in 2026. No concrete plans have been presented for 2027. About half of the plan consist of spending reductions, including the abolition and merger of government offices, restrictions on new purchases of goods and services and reduced capital expenditure. Salaries of state and local officials will be frozen, apart from teachers, doctors and nurses. The government also plans to reduce the duration and amounts of unemployment benefits. On the revenue side, the plan includes eliminating two national holidays, higher taxes on above-average earners, higher VAT for sugary and fatty foods and drinks, higher taxes on gambling, and an increase in health insurance contributions of employers, employees and the self-employed. The projections foresee a general government deficit of 4.4% in 2026 and 2027. Higher trade barriers and geopolitical tensions slowing growth in the European automotive sector, as well as the size of future fiscal consolidations, represent downside risks to the outlook.

Fiscal consolidation and lower foreign demand will weigh on growth

Real GDP growth is projected to remain subdued, at 1.1% in 2026 before recovering to 1.8% in 2027. Weaker foreign demand for transport equipment in Europe and the rest of the world, as evidenced by lower car registrations, will weigh on the sector’s output. At the same time, trade will increase in 2027 as new automotive plants become operational. Higher absorption of EU funds in 2025 and 2026 will support investment growth, whereas this positive impulse on fixed investment will reverse in 2027. Lower interest rates and higher nominal wage growth are supporting real income gains and consumption. The fiscal consolidation is expected to weigh on growth over 2026-27. Gas and electricity price caps are renewed for 2026, covering approximately 90% of households. Still, higher energy prices and robust nominal wage growth are expected to push headline inflation to 3.7% in 2026 before slowing to 2.5% in 2027.

Accelerating structural reforms to raise growth

Preparing a multi-year consolidation plan that credibly reduces expenditures over the medium‑term and broadens the tax base is needed to create fiscal space, with a focus on addressing the challenges of rapid population ageing and improving the efficiency of public spending. Strengthening the rule of law, fighting corruption and boosting trust in the judicial system is essential. Tighter regulation of lobbying activities and strengthening legislation on conflicts of interest and asset declarations would reduce uncertainty and raise growth. Measures to improve the business environment, including the simplification of administrative requirements for starting new companies and reducing regulatory barriers for professional activities, especially for architects and civil engineers, could further enhance competition.