Central Bank: Slovak Economy Could Grow by 0.6% in 2026, Then by 2.5%

Bratislava, 22 December (TASR) - The Slovak economy could grow by 0.6 percent in 2026 and by 2.5 percent in 2027 and 2028, and the public finance deficit is expected to reach 4.5 percent of gross domestic product (GDP) in 2026, according to a forecast called 'Economic and Monetary Developments - Winter 2025', presented at a press conference by Slovakia's central bank (NBS) governor Peter Kazimir, and NBS executive director Michal Horvath. According to them, inflation is expected to continue to decline in the coming years, stabilising at 2-3 percent in 2027 and 2028, and employment should decline by about 20,000 people by 2027."Despite the difficult period the Slovak economy is currently experiencing, we're slightly improving our growth forecast. Next year, our economy should grow by 0.6 percent. Supported by better developments abroad, but also by domestic demand, economic growth should subsequently accelerate to 2.5 percent in 2027 and 2028. Exports will be driven by the expected ramp-up of car production at the new plant. After two years of decline in household disposable income, their purchasing power should recover," said Kazimir. "We're downgrading our forecast for public finances in 2026. The public finance deficit is expected to reach 4.5 percent of GDP in 2026, gradually moving away from the government's target. The more pessimistic outlook is caused by weaker revenues in the economy and lower tax collection efficiency," he pointed out. According to the governor, a noticeable improvement in public finances in the coming years is only possible with the help of additional consolidation measures. Public debt will exceed 60 percent of GDP this year and, with the current fiscal policy settings, will reach 66 percent of GDP in 2028. Given the expected economic growth, even the release of accumulated cash reserves won't be able to reverse the adverse impact of persistently high deficits on debt. Kazimir went on to say that inflation should continue to decline in the coming years. This will be helped by the fading impact of higher taxes and excessive commodity price growth on global markets, together with weaker consumer demand. "A more significant slowdown in price growth next year will be prevented by the adjustment of regulated energy prices for some households. In the coming years, consumer price growth could stabilise between 2-3 percent. The European Council has postponed payments for emissions from transport and heating (known as ETS2) by one year, which has lowered the inflation estimate for 2027 but increased it for 2028," he emphasised. Meanwhile, Horvath stressed that weak economic growth is affecting the labour market. Employment is expected to decline by approximately 20,000 people by 2027. This will be mainly due to unfavourable demographic developments, consolidation, and a weaker economy. On the other hand, the deterioration in the labour market is mitigating labour shortages and slowing salary growth. "Economic development continues to be marked by a very uncertain environment. In addition to global events, domestic developments are also a significant source of uncertainty. Growth next year could therefore be either better or worse than our prediction, with the threat of worse developments in the years to come. Slower growth could come with the consolidation of public finances and the weakening competitiveness of European and Slovak industry. Energy prices for 2027 and 2028 remain a big unknown, which could also affect inflation and growth in those years," added Horvath. am/mcs