Slovakia with risks on the radar

Slovakia’s economy remains under pressure, with GDP growth stuck below 1% y/y. In 3Q25, growth reached 0.9% y/y and 0.3% q/q, confirming a weak trend. Foreign trade was the main growth driver in 3Q, while investment contributed positively thanks to EU funds. Household consumption grew modestly, but at its weakest pace since late 2023. Our full-year estimate for 2025 remains at 0.7%, unchanged from the previous revision. Looking ahead, growth should improve slightly to around 1.3% in 2026, supported by Recovery Plan funds, a gradual rebound in foreign trade and the ECB’s accommodative policy. However, risks persist due to the slow recovery in Germany and further fiscal consolidation, which will again dampen activity next year.

Inflation remains elevated, driven by VAT hikes and the introduction of a transaction tax, partly offset by energy price regulation. For 2025, average inflation is projected at 4%. A new support scheme, including subsidies and vouchers, will help mitigate rising energy costs. For 2026, we forecast inflation in the range of 3.5% to 4.2%, depending on how the Statistical Office accounts for energy vouchers in its calculations.

Public debt is forecast to exceed 60% of GDP this year. Since the exemption from the debt brake law expires two years after the new government takes office, the strictest debt brake rules and new obligations for the government will apply. Therefore, fiscal consolidation will need to continue.

Unemployment has started to rise, reaching 5.5% in 3Q, and is expected to climb further, averaging 5.8% in 2026, signaling a slight cooling of the labor market.

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