Slovakia: Storm clouds over trade
|
The word of the year for Slovakia in 2024 was consolidation, and everything suggests that the word of this year will be trade. While the economy maintained solid growth last year - albeit weakening toward the end - this year’s outlook is much more uncertain. We already revised our GDP growth estimate downward when consolidation measures were announced, but at this moment, we see significant downside risks due to complications in free trade, the introduction of tariffs, and the resulting slowdown in the economies of our foreign partners. Currently, we expect Slovakia’s economy to grow by 2% this year and at a similar pace next year, though with negative risks.
Inflation picked up at the beginning of the year, mainly due to the introduction of a higher value-added tax as part of the consolidation package. In the coming months, we still expect a further pass-through of this measure into consumer prices, as some impact has already materialized. This will be accompanied by other adopted measures that are pushing business costs higher (e.g. the transaction tax), keeping inflation elevated. We estimate that the average inflation rate (CPI) this year will be around 4%.
The government aims to reduce the public finance deficit to 4.7% this year, down from 6% in 2024, but newly planned expenditures could complicate consolidation efforts. While last year’s consolidation package focused on revenue increases through higher taxes, it has also weakened business competitiveness. Further consolidation efforts have already been announced for 2026, worth around EUR 2bn, with a stronger focus on public sector efficiency. However, part of the amount will be used to cover new expenditures.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.