Slovakia’s economy slowed in 2025, making it harder to reduce the fiscal deficit and stabilise public debt, the International Monetary Fund (IMF) said after completing its annual review of the country.
An IMF mission led by Magnus Saxegaard held talks with Slovak authorities from January 14 to 27. In its concluding statement, the Fund said Slovakia faces growing medium-term challenges linked to global economic fragmentation and an ageing population, which are weighing on growth and slowing income convergence with more advanced EU countries.
According to the IMF, the country now needs a clear multi-year plan to restore debt sustainability while pushing ahead with structural reforms that support productivity and longer-term growth.
Economic growth is estimated to have slowed to 0.8% in 2025, down from 1.9% in 2024. The IMF attributed the slowdown mainly to fiscal consolidation, which reduced household consumption, and to high global uncertainty, which weakened private investment.
Imports rose strongly, driven largely by expanded production capacity in the automotive sector, while exports recovered only modestly.
Inflation accelerated in 2025 following a VAT increase introduced at the beginning of the year and continued high inflation in services. The fiscal deficit is estimated at 5% of GDP, well above pre-pandemic levels.
Growth is expected to remain weak in 2026, at around 0.9%. The IMF said further fiscal consolidation and a cooling labour market are likely to restrain domestic demand, despite strong public investment ahead of the end of EU Recovery and Resilience Facility funding in 2026.
Core inflation is projected to return to the 2% target by mid-2027, while headline inflation is expected to stay higher for longer as energy price subsidies are gradually withdrawn.
The IMF assessed risks to economic growth as mainly negative. It warned that escalating trade tensions, geopolitical uncertainty and volatile energy prices could weigh on exports and investment.
At home, delays in fiscal consolidation could push up government borrowing costs and increase future adjustment needs. Problems with absorbing EU funds and governance concerns could weaken investment, while a sharp correction in real estate prices could affect the financial sector. The planned EU phase-out of Russian gas until 2027 could also lead to higher energy prices.
Finance Minister Ladislav Kamenicky (Smer) said the IMF’s assessment reflected economic realities already facing Slovakia.
“The IMF report describes a reality we are aware of. Geopolitical tensions, tariffs, trade wars, high energy prices and the risk of recession among our largest trading partners all have a negative impact on Slovakia,” Kamenicky said.
He added that the government must also deal with public finances following the previous administrations of Igor Matovic, Eduard Heger and Ludovit Odor.
“It is demanding, but so far we are managing to make progress,” he said.
According to the minister, maintaining stable public finances and strengthening growth will require pro-growth measures. He pointed to a recent working visit to Paris with Prime Minister Robert Fico for talks with representatives of the Organisation for Economic Co-operation and Development (OECD).
The IMF said the size of fiscal consolidation planned in the 2026 budget was broadly appropriate. However, it noted that the overall package appeared to have been shaped by late political compromises.
Under IMF projections, the fiscal deficit could fall to 4.4% of GDP in 2026, compared with the government’s target of 4.1%. The Fund said the planned reduction strikes a balance between supporting growth and continuing consolidation. If economic conditions weaken, it recommended allowing automatic stabilisers to operate.
Without further consolidation after 2026, rising ageing-related spending and higher debt-servicing costs would push public debt close to 105% of GDP until 2040, the IMF said.
The IMF also recommended reforming Slovakia’s debt brake ahead of its reactivation in 2026, warning that doing so would reduce the risk of a sharp fiscal consolidation that could further weaken the economy.
In its report, the Fund outlined several measures that could help reduce future fiscal risks, including limiting the 13th pension, reducing social spending, increasing the VAT rate and shortening maternity leave.
The Finance Ministry responded that these recommendations did not reflect Slovakia’s political reality and were not aligned with the current priorities of the government.
To stabilise debt, consolidation would need to continue from 2027 onwards, including measures worth about 2.3% of GDP to meet the government’s deficit target for 2028.
The IMF described Slovakia’s banking sector as resilient, but said the economic slowdown requires continued caution. Higher interest rates have increased debt burdens for households and companies, while risks in commercial real estate remain elevated.
Beyond fiscal policy, the Fund stressed the importance of structural reforms. These include raising labour force participation, addressing skill shortages, supporting innovation and improving access to risk capital. The IMF also highlighted the importance of good governance and secure, affordable energy supplies for long-term growth.
The Fund emphasised the key role of Slovakia’s Council for Budgetary Responsibility in monitoring the long-term sustainability of public finances. (The Slovak Spectator)