Finance Ministry: Slovakia to Cut Deficit More Slowly Than Planned

Bratislava, 29 April (TASR) - Slovakia's public finance deficit is set to decline more slowly in the coming years than originally planned, as from this year's expected level of 4.3 percent of GDP, it should fall to 4.2 percent in 2027 and 4.1 percent in 2028, the Finance Ministry announced in its 2026 Annual Progress Report, approved by the government on Wednesday. Slovakia submits the document to the European Commission each year. As recently as last autumn, budget targets for 2026 to 2028 had been set at 4.1 percent, 3.5 percent and 2.8 percent of GDP, respectively. "The government is revising the targets in response to slower growth due to the external environment, geopolitical uncertainty, pressure on EU competitiveness and the political cycle," the ministry stated in the document. For 2027 and 2028, it therefore plans to reduce the deficit by only 0.1 percentage points per year. However, even the revised targets fully comply with European fiscal rules, according to the ministry. The ministry pointed out that the original medium-term plan from 2024 had envisaged a gradual decline of the deficit towards 3 percent of GDP by 2027, with the aim of halting the growth of public debt. However, the macroeconomic environment has deteriorated significantly since autumn 2024, leading to gradual upward revisions of the targets. "Macroeconomic uncertainty is currently further increased by the ongoing conflict in Iran and the blockade of the Strait of Hormuz, which could raise the estimated deficit for 2027 by up to 0.7 percent of GDP without government action. The political cycle may also affect the situation next year. The government has already announced measures to support economic growth, though their scale has not yet been specified," the ministry said. According to the ministry, achieving even the revised targets will require offsetting negative impacts on public finances. "This mainly concerns rising interest costs as well as increased defence spending due to the delivery of larger volumes of defence equipment. The budget is also under pressure due to population ageing, which increases social and healthcare expenditure. The possible approval of planned pro-growth measures will likewise increase the need for consolidation measures," it added. The government will focus on consolidation measures aimed at reducing tax evasion and improving the efficiency of budget spending. Given the high initial deficit and unfavourable economic environment, stabilising and subsequently reducing public debt will require consolidation across two electoral terms, the ministry said. By the end of the monitored horizon in 2028, gross debt should reach around 66 percent of GDP if the budget targets are met. The ministry underlined that this is significantly lower compared with a scenario of the current government not changing any policy. "Without government intervention, the deficit could have reached as much as 7 percent of GDP this year, while debt could have risen towards 100 percent of GDP over the next decade," it calculated. mf