The International Monetary Fund (IMF) Executive Board has concluded its Article IV consultation with the Slovak Republic, endorsing the staff appraisal without a formal meeting. The IMF noted that Slovakia's economic growth accelerated to 2 percent in 2024, driven by private consumption due to real wage growth and extended energy support. However, net exports remained weak.
Growth is expected to slow to 1.8 percent in 2025 due to fiscal consolidation but should rise again to 2.1 percent in 2026. Inflation is projected to increase temporarily to 4.1 percent in 2025 before moderating thereafter.
"The Slovak economy is recovering despite significant headwinds," said the IMF Executive Directors, noting the challenges of weak external demand and fiscal consolidation. They also highlighted risks such as trade policy uncertainty and potential delays in EU fund disbursements.
The government aims for ambitious fiscal consolidation from 2025-28, targeting a reduction in the deficit by about 3.5 percentage points of GDP. The budget for 2025 plans a headline deficit reduction to 4.7 percent of GDP from an estimated 5.8 percent in 2024.
Further measures are needed beyond 2025 for targeted consolidation while aligning with long-term growth and climate goals. "Prioritizing expenditure-based measures would result in a more balanced fiscal consolidation," stated the IMF staff.
Safeguarding Slovakia’s fiscal framework is deemed essential for credibility, with recommendations for reforming the debt brake before it takes effect in 2026.
The financial sector appears resilient but faces vulnerabilities from real estate markets. Stress tests indicate banks have sufficient capital against shocks, though further development of macroprudential policies is advised.
Structural reforms are recommended to diversify Slovakia's economy and sustain productivity growth while addressing demographic challenges and carbon emissions reductions.
"Slovakia needs structural reforms to diversify its economy, sustain productivity growth, increase the labor force, and further reduce carbon emissions," emphasized the IMF report.