IMF: Without Additional Measures, Slovak Debt Might Rise to 105% of GDP by 2040

Bratislava, 27 January (TASR) – Slovakia's economic growth slowed in 2025 to an estimated 0.8 percent from 1.9 percent in 2024, complicating efforts to reduce the fiscal deficit and place public debt on a sustainable path, according to the concluding statement of a mission of the International Monetary Fund (IMF). Without additional measures applied as of 2027, warned the IMF, the deficit might gradually go up and public debt approach 105 percent of GDP by 2040 The IMF said the fiscal deficit remained in 2025 at around 5 percent of GDP, while inflation accelerated mainly due to a VAT tax increase at the start of 2025 and higher services inflation. The economic slowdown, the fund said, was linked to fiscal consolidation and high global uncertainty, which dampened private investment. Imports grew faster than exports, mainly due to expanding capacity in the automotive sector. Growth is expected to remain at around 0.9 percent in 2026. Domestic demand is set to continue to be constrained by consolidation and a cooling labour market, while public investment is estimated to remain strong ahead of the end of the Recovery and Resilience Facility in 2026. Core inflation is expected to fall to the 2 percent target by mid-2027, according to the IMF, but headline inflation is set to remain elevated due to the gradual phasing out of energy subsidies. The fund described the consolidation in the 2026 budget as "broadly appropriate", with its projections pointing to a deficit of 4.4 percent of GDP in 2026. However, it stressed the need for a multi-year strategy and continued consolidation beyond 2026. In a scenario without additional measures to be applied as of 2027, the deficit would gradually widen and public debt would approach 105 percent of GDP by 2040, the IMF said. To meet the goal of reducing the deficit to 2.8 percent of GDP by 2028, measures amounting to about 2.3 percent of GDP would be needed. Risks to growth stem from an escalation of trade tensions, geopolitical risks and commodity price volatility, as well as domestic factors including delays in consolidation, weaker absorption of EU funds or a sharp correction in property prices. The IMF also cited the risk of higher energy prices linked to the EU agreement to end imports of Russian gas by 2027. The fund also recommended structural reforms to support productivity and medium-term growth, including measures to increase labour market participation and address labour shortages. mf