Slovakia’s Struggle: Navigating Fiscal Consolidation Amid Economic Slowdown and Austerity Fatigue
Slovakia Faces Growing Fiscal Consolidation Fatigue, Threatening Medium-term Fiscal Sustainability
October 13, 2025 | By Alessandra Poli, Sovereign and Public Sector Analyst, Scope Ratings
Slovakia faces a heavy challenge. Its growth slows as fiscal plans tire the public. The government set a third fiscal plan for 2026 to cut the budget gap in a weak economy. Doubt grows as outside pressures and strict rules mix and hurt safety.
Ambitious Consolidation Amid Slowing Growth
In late September, the government approved a fiscal plan worth about EUR 2.7 billion. This sum nears 2% of GDP. The plan comes after similar steps in 2024 and 2025. Those steps tried to reverse past losses from softer budgets.
Slovakia’s export-based economy meets headwinds. US tariffs rise and key European partners slow. Scope Ratings now predicts GDP growth of 0.8% in 2025. Before, the rate was 1.5%. In 2026, growth is expected at 1.2% instead of 1.7%. This rate lags behind Poland at 3.1%, Slovenia at 1.8%, and the Czech Republic at 2.3%.
Fiscal Measures and Their Economic Implications
The new plan focuses on revenue rules. The government makes personal income taxes steeper. It also raises contributions for health and social funds. This mix aims to cut the fiscal gap from about 5% of GDP in 2025 to 4.1% the next year. Tax moves may lower local spending and business activity.
Some rules are short term. The plan cancels two public holidays for now. It freezes wages temporarily and stops inflation updates on extra pension pay. Because these moves are brief, new cuts might be needed later.
On spending, the government did not explain EUR 1.3 billion in planned cuts. Many savings may come by ending energy subsidies worth EUR 435 million set earlier. Other cuts will likely hit public administration and local budgets while keeping pensions and social aid safe for those in need.
Risk of a Fiscal Consolidation Trap
Slow growth and tax-heavy plans may trap the economy. This trap can slow growth so far that more cuts become needed. Scope Ratings sees public debt growing from 59.3% in 2024 to about 69% by 2030. Military spending might also rise. Slovakia must now reach NATO’s target of 3.5% of GDP by 2035. This is a jump from 2% in 2024. Soon, the politics of the 2027 elections may also limit further cuts.
Looking Ahead
Slovakia has a long road to keep its budget safe. The government must balance hard plans with outside pressures and local needs. Watching fiscal steps and the economy remains key as Slovakia moves through hard times ahead.
About the Author:
Alessandra Poli is an Analyst in Sovereign and Public Sector ratings at Scope Ratings, with a focus on ratings and research for public-sector borrowers.
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