OECD Economic Surveys: Slovak Republic 2026

Executive summary

Key messages

A weak European car market, global trade tensions that are particularly acute for automobiles, the global energy price crisis and a high budget deficit put the Slovak economy at a crossroads. Policy choices must be made, which will shape its future direction for many years. They should prepare the Slovak economy for lasting prosperity by enhancing its overall dynamism so that it can adapt its strong manufacturing base to emerging areas of demand, be they still in the automotive sector or elsewhere such as green products or AI. This calls for solidly improving the business environment through pro-competitive reforms as well as fostering learning, reskilling and upskilling. Paving the way towards such a future requires restoring fiscal sustainability in a way that fully takes account of rapid ageing.

• Despite accelerating EU funded spending in the near term, growth will remain subdued under the weight of declining consumer confidence and a stagnant export market for cars, although some improvement is expected for 2027. Fiscal consolidation integrated with reforms boosting employment would safeguard public finance sustainability and long-term growth.

• Enhancing the business environment by tackling corruption, improving product market regulation and making public investment more efficient would foster innovation and increase technological diffusion. Better quality and more inclusive education and lifelong learning would help further develop human capital and alleviate persistent skills shortages.

• AI adoption can be accelerated by streamlining regulation to ease access to data, by helping firms to comply with AI regulation, and by strengthening AI-related higher education and lifelong learning

• The net-zero transition, while involving adjustment costs, offers economic opportunities that can be realised by increasing public R&D for low-carbon technologies, streamlining permitting for low-carbon energy projects, and reinforcing climate adaptation through local action and private insurance.

Strengthening growth and fiscal prospects

Near-term growth is set to remain subdued. A roughly stagnant EU market for cars and higher US tariffs are weighing on exports. Uncertainty and the spike in global energy prices weaken consumer and business confidence. The substantial fiscal consolidation efforts in 2025-2026 have a contractionary effect cushioned however by EU Recovery and Resilience Facility drawdowns. Over time, as energy prices recede and inflation normalises, private consumption will drive a modest recovery in 2027. Looking ahead, policy efforts to boost employment across age, gender and population groups will be essential to offset the impacts of rapid ageing on long-term growth and fiscal prospects.

Sluggish exports and consumption weigh on real GDP growth, which is expected to remain weak. In 2026, growth is projected at 0.7%, before recovering to 1.6% in 2027. Weak European demand for cars and US tariffs will lower export demand. Accelerated absorption of EU funds will continue to support investment in 2026, partly offset by a dampening effect of economic uncertainty, higher energy prices and the ongoing fiscal consolidation package.

Real income gains due to high nominal wage growth and moderating inflation are supporting private consumption. Consumer price inflation remains elevated, with easing service and food price inflation offset by new inflationary pressures from energy prices. Renewed gas and electricity price caps that covered nearly 90% of households in 2025 and 2026 are mitigating some of the increase in energy prices on consumer prices.

Fiscal consolidation, to the extent that it is credible, will enable households to lower precautionary savings and companies to increase investment. To ensure the credibility of fiscal adjustment, and hence its benefits in terms of boosting private spending by reducing uncertainty, it is key to keep shifting its composition from revenue increases to spending restraint while ensuring that expenditure-side objectives are fully achieved.

Figure 1. The ratio of older people to those of working age is set to nearly double

Old-age dependency ratio, %

Note: The old-age dependency ratio is defined as the number of people aged 65 and over (old) divided by the number of people aged 20-64 (working age population).

Source: UN World Population Prospects database.

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Medium-term fiscal consolidation should give priority to spending cuts that can preserve or enhance growth prospects. Energy subsidies impose a significant burden on the budget, distort economic choices and discourage energy-efficiency efforts. Pension reforms can bring in savings while prolonging working lives in support of growth. Moreover, relying more on user fees to fund the operational expenses of transport operators would reduce public spending.

There is nonetheless also scope to raise revenue from less distortionary taxes. Reduced VAT rates on specific products cost 1.4% of GDP per year to the public purse. The social objectives pursued by these reduced rates could be achieved at much lower cost through targeted transfers while applying the standard rate to all products. Recurring property taxes yield very low revenue and are difficult to increase in the current system, where they are based on areas rather than market values. There is a strong case for putting in place the necessary tax administration capacity and implementing a market-value based property tax.

Keeping growth robust and public finances sound over the long term in the face of rapid ageing calls for integrating fiscal adjustment with structural reform. Growth and fiscal sustainability would both benefit considerably from higher labour force participation of women, older workers and the Roma. First, for women, reducing the length of parental leave, which is currently among the longest in the OECD, would reduce the risk of detachment from employment after welcoming a child. Adequate provision of childcare is essential to reconcile work and parenthood. The Slovak Republic is expanding kindergarten capacity with a right to enrolment from the age of three. A newly introduced per-enrolled-child funding formula sharpens incentives for municipalities to provide early childhood education.

Second, for older workers, curtailing early retirement pathways is important not only for increasing their participation over the long term but also to avoid the large outflows towards early retirement that occurred after the 2022 pension reform. Third, intensifying education, lifelong learning and other programmes to better integrate the Roma in the labour market can produce macroeconomic benefits in addition to improving social inclusion.

Table 1. Near-term economic projections

	2023	2024	2025	2026¹	2027¹
Real GDP (% changes)	2.1	1.9	0.8	0.7	1.6
Unemployment rate (% of labour force)	5.8	5.3	5.4	5.9	6.0
Harmonised index of consumer prices (y-o-y % changes)	11.0	3.2	4.2	4.2	2.6
Public debt (Maastricht definition, % of GDP)	55.8	59.7	61.4	62.6	64.6

1. OECD estimates.

Source: OECD Economic Outlook: Statistics and Projections database.

Strengthening economic dynamism and growth

Geoeconomic developments and structural changes pose significant risks for the Slovak Republic and its globally integrated automotive sector. Tackling corruption, reducing administrative burdens and improving the tax system would enhance economic dynamism, raise productivity and foster diversification. Boosting business research and development, attracting FDI and increasing the efficiency of public investment would help advance innovation and technological diffusion, allowing companies and sectors to move-up the value chain by performing more advanced tasks in global supply chains. Better quality and more inclusive education and lifelong learning – including adult upskilling and reskilling – would help further develop human capital and alleviate persistent skills shortages.

Convergence in living standards has slowed in recent years, with real GDP per capita growth falling behind that of regional peers. Changes to the global trading system, technological advances and economic uncertainty pose significant risks for the Slovak growth model that relies on the globally integrated automotive sector. It accounts for around 10% of GDP and is dominated by lower-value-added activities. Productivity spillovers to domestic companies have been weak.

A more dynamic business environment could help diversify the economy and better adapt to global shifts. Yet, several structural barriers impede dynamism and income convergence.

Perceptions of weak judicial independence and corruption undermine investor confidence and economic efficiency. Many companies perceive corruption as widespread, and fast-changing policies as impediments to growth and investment. Shortcomings remain on lobbying regulation, conflict of interest rules and legislation on asset declaration. New rules on public procurement adopted in 2024 may reduce competition and weaken corruption prevention safeguards.

Administrative and regulatory requirements remain cumbersome. Starting a limited liability company involves a large amount of paid-up capital. Substantial barriers complicate entry in services professions. Heavy tax burdens on additional work, as well as uneven capital tax rates deter growth and investment. The introduction of a financial transaction tax (FTT) in 2025 risks diverting companies’ resources from core business activities, reducing market liquidity, spurring informality and raising the relative tax burden compared to neighbouring countries, thereby discouraging investment.

Business investment in research and development (R&D) remains below OECD and regional levels, and foreign direct investment inflows have declined. Improving the business environment and better incentivising private R&D expenditure, including among SMEs, could foster innovation and support knowledge spillovers. Increasing the efficiency of public investment would advance innovation and technological diffusion. Accelerating the absorption of EU funds would help scale up investments meeting well-defined priorities in both conventional and digital infrastructure that are lagging.

Poor development and retention of human capital have led to persistent skills shortages that hamper company expansion and investment. Improving the education system, facilitating lifelong learning, and increasing the use of active labour market policies that focus on re-training and upskilling, as well as facilitating skilled immigration – including the return of Slovaks living abroad – would raise productivity growth.

Figure 2. Further advances are warranted to fight corruption and improve pro-competition regulation

Notes: Visegrad 3 refers to the average of the data for the Czech Republic, Hungary and Poland. Panel A shows the point estimate and the margin of error. Panel B, the Product Market Regulation (PMR) indicator is a composite index that encompasses a set of indicators that measure the degree to which policies promote or inhibit competition in areas of the product market where competition is viable.

Source: World Bank, Worldwide Governance Indicators; OECD Product Market Regulation database; and OECD calculations.

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Reaping the economic benefits of AI

As a general-purpose technology, AI can enable large productivity gains across the Slovak economy. However, AI use among Slovak companies is lagging while AI research production lies substantially below the OECD average. Improving framework conditions by making it easier for businesses to comply with EU AI regulation and easing access to data while facilitating experimentation will strengthen adoption. Nurturing AI-related skills through higher education and lifelong learning will also be key.

AI adoption is lagging but growing. In 2025, 18% of businesses reported using AI, up from 7% in 2023. As in other countries, AI adoption is more widespread among larger companies and in knowledge-intensive sectors.

Providing technical and legal expertise while facilitating experimentation can broaden AI adoption, especially among small and medium-sized enterprises. Compliance costs with the regulatory framework, which is shaped by the EU AI Act, are potentially high, particularly for firms too small to have in-house legal expertise. Making sure that the recently established Digital Innovation Hubs provide legal as well as technical advice would facilitate AI adoption. It is also important to accelerate the operational implementation of controlled test environments (“sandboxes”), where businesses, including SMEs, can experiment AI use under the supervision of regulators.

Low digital and AI skills limit AI development and adoption. Most Slovak companies reported AI skill shortages in 2024. Strengthening AI skills calls for continuing to promote university, vocational and lifelong-learning programmes to train, reskill and upskill workers in AI-relevant fields during their education and throughout their careers, including through flexible adult learning pathways, individual learning accounts and micro-credentials, and by upgrading the digital and AI skills of teachers and public sector employees.

Broad domestic data availability is essential for AI model training. The comparatively limited spread of AI calls for facilitating access to existing Slovak-language data. Expanding obligations for public institutions to share databases and upgrading the legal and regulatory framework could help companies to access data in ways that simultaneously respect privacy and minimise legal risk.

Figure 3. The skills base for AI has scope to expand

Bachelor graduates as a percentage of their age cohort, %, 2024 or latest available year

Note: Category "other STEM" refers to the following educational fields: "natural sciences, mathematics and statistics" and "engineering, manufacturing and construction".

Source: OECD Education Statistics database; OECD Population Statistics database: and OECD calculations

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Unlocking the potential of the net-zero transition and adapting to climate change

The Slovak Republic has a strong basis for making the net-zero transition a source of economic strength. Realising this potential while minimising adjustment costs hinges on shifting some of public R&D towards low-carbon technologies, streamlining procedures for low-carbon power projects and raising the price of emissions in sectors where they are underpriced. The Slovak Republic will also have to adapt to the consequences of climate change by mobilising local authorities as well the insurance sector.

A strong manufacturing sector positions the Slovak Republic well for the net-zero transition. The assembly of electric vehicles is expanding fast in Slovakia as is the production of batteries and heat pumps. Future growth in low-carbon technologies would benefit from stronger R&D. The share of public-sector R&D allocated to low-carbon energy technologies, currently among the lowest in the OECD, should be increased, including by giving higher priority to this criterion in project selection.

Ample low-carbon power generation is a valuable asset. Most of Slovakia’s low-carbon electricity comes from nuclear and hydro power plants, which have the advantage of producing power independently of wind and sunshine conditions. Streamlining permitting procedures for low-carbon electricity sources, including by swiftly implementing the simplified procedures adopted in 2025, would support future expansion.

More uniform pricing of greenhouse gas emissions across sectors is needed. Meeting net-zero targets requires a greater fall in emission than anticipated on current policy settings. GHG emissions from buildings currently remain considerably underpriced by comparison with the rest of the economy. It is important in this regard to fully implement the extension of the EU Emissions Trading Scheme (ETS2) to buildings as from 2028.

The Slovak Republic needs to adapt to intensifying consequences of climate change. Average temperatures have already risen by 1.7 degrees over the past one and half centuries. Extreme weather events are foreseen to become more frequent. The national adaptation framework could be strengthened by more formally linking local plans to the national strategy. Incentives for private sector efforts to reduce exposure to climate risks could be sharpened by fostering the development of private insurance against these risks while avoiding creating expectations that the government will regularly compensate households and businesses suffering losses from climate events.

Figure 4. Very-low-carbon electricity is a source of strength for the net-zero transition

Carbon dioxide emissions of electricity produced, grams of CO₂ per kWh, 2024

Source: IEA Emissions Factors database.

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MAIN FINDINGS	KEY RECOMMENDATIONS
Strengthening macro-economic and fiscal prospects
Starting from a large budget deficit, the Slovak Republic will in coming decades undergo deep ageing, straining public finances. Past consolidation packages relied mostly on taxes, especially on labour.	Conduct near and medium-term fiscal consolidation that relies more on reducing expenditure and identifying efficiency gains through spending reviews, and less on raising revenue while avoiding increases in distortionary taxes.
Consolidation packages are currently vulnerable to implementation and economic risk.	Design multi-year fiscal consolidation plans with stress tests for economic and implementation risks and specific measures to address risks if needed.
The debt brake calls for overly rapid fiscal consolidation but has historically been in force less than half the time because of extensive exemption provisions.	Reform the debt brake to increase its credibility by giving it a longer horizon, making it applicable to budget acts, and reducing exemption periods and clauses, including the two-year exemption after Parliamentary approval of the government programme statement.
Early retirement rose massively in 2023-2024 following the 2023 pension law. A reform passed in 2024 tightened conditions and increased penalties for early retirement but left the pathways open.	Narrow early retirement pathways.
Energy subsidies were introduced to mitigate the energy price shock following Russia’s war of aggression in Ukraine. Unlike most other countries, the Slovak Republic still retains large energy subsidies with severe fiscal, economic and environmental costs. Targeting was introduced in 2026, but nearly 90% of households are eligible.	Remove energy subsidies while supporting lower-income households through sufficiently targeted social transfers decoupled from energy consumption.
Boosting economy-wide competitiveness amid acute automotive sector challenges
Levels of perceived corruption remain high and judicial independence weak.	Increase the independence of the judiciary, including by introducing sufficient guarantees of impartiality in relation to the dismissal of members of the judicial council.
The difference in statutory corporate tax rates between large and small companies is among the largest in the OECD. Size-based tax differentials can incentivise entrepreneurs to stay small even if they have growth potential.	Eliminate corporate tax differentials between small and larger companies.
A financial transactions tax (FTT) was introduced in April 2025 to strengthen government revenues. FTTs are highly distortive taxes that reduce economic activity and may increase informality.	Abolish the financial transactions tax, while offsetting the fiscal impact.
The use of EU funds for public investment lags peer countries, largely reflecting deficiencies in project planning and preparation.	Strengthen project preparation and implementation capacity at line ministries and lower levels of government via targeted training.
R&D subsidies are generous, while business R&D spending is low.	Make the R&D tax allowance refundable for small and young companies. Consider further expanding the use of direct R&D support, such as competitive R&D grants, while enhancing transparency and using more foreign evaluators and established independent agencies.
Slovak adults have lower skills than the OECD average, and participation in life-long learning is low compared to other OECD countries.	Regularly review and update eligibility criteria for the new individual learning accounts (ILAs) to reflect evolving labour market needs. Introduce co-payment requirements, while ensuring that contributions do not create barriers to participation, particularly for disadvantaged groups.
Fostering AI adoption and development
AI adoption in companies lags EU peers across sectors and company sizes, and compliance with AI regulation is complex and costly for companies, particularly SMEs.	Facilitate AI uptake among companies by providing businesses of all sizes access to tailored guidance on the EU AI Act and related obligations through the Digital Innovation Hubs.
The ability to experiment with and innovate in AI is constrained by the absence of operational regulatory “sandboxes” (controlled environments in which innovators can test and refine AI systems with regulators).	Operationalise the pilot sandbox for AI, with simplified admission procedures to enable broad participation, particularly from SMEs and startups.
Limited high-quality data is available for model training, particularly in the Slovak language.	Expand obligations on public sector institutions to share datasets while maintaining appropriate privacy safeguards and adopt legal and regulatory frameworks that facilitate data and text use.
Reaping the potential of the net zero transition and adapting to climate change
Cumbersome administrative procedures slow down the deployment of low-carbon sources of power generation.	Swiftly implement the simplification procedures adopted in 2025 and monitor their effects with a view to introducing a new wave of streamlining.
The largest power producer signed yearly agreements through 2023-2026 with the government to sell electricity at below-market prices to households. Eligibility was restricted to 90% of households in 2026.	Move to a fully market-based system for the pricing of electricity to households while supporting adversely affected low-income households with targeted transfers untied from electricity consumption.
Widespread lack of property insurance, especially for climate-disaster-related damages, leaves many households vulnerable to large losses and without the guidance of insurance-price signals.	Consider introducing property insurance mandates against climate-related risk while expanding property insurance coverage through public-private risk sharing that maintains adaptation incentives combined with targeted assistance to low-income homeowners.

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