Fiscal risks in Slovakia remain elevated and the consolidation outlook has weakened. Although the government has introduced revenue-raising measures — including higher VAT and corporate income taxes and a new financial transaction levy — expenditure pressures continue to dominate. Persistent social spending commitments, rising public-sector wage costs and the extension of energy-support measures constrain fiscal adjustment, and the withdrawal of temporary support has been slower than initially envisaged.

In 2026, the deficit is now projected to remain broadly unchanged at around 5.3% of GDP, rather than narrowing, despite the rollout of a substantial consolidation package. While measures such as a wage freeze in the public sector, a more progressive income tax schedule and restrictions on VAT deductions will bring savings and revenue, these will be offset by ongoing spending demands, including defence procurement, teacher wage adjustments and co-financing requirements tied to EU funds. With macroeconomic growth still subdued and tax buoyancy fading, fiscal space will remain limited.

A renewed backlog of defence investment and EU-funded projects is expected to keep the deficit close to 5.3% again in 2027, subject to policy implementation risks. Public debt, which already breached the 60%-of-GDP threshold in 2025, is projected to continue rising through the forecast horizon — reflecting structurally high deficits, weaker nominal growth and limited stock-flow adjustments.

Slovakia’s business environment is well above average. The World Bank Institute’s annual Worldwide Governance Indicators surveys suggest that the regulatory and legal frameworks are generally business-friendly, though a certain level of corruption is still perceived as present. The Heritage Foundation’s 2025 Index of Economic Freedom assigns Slovakia rank 42 out of more than 180 economies (score 68.4, “moderately free”). The country scores strongly on property rights, judicial effectiveness, tax burden, trade freedom and investment freedom, though weaknesses remain in the areas of government integrity and labour freedom. Meanwhile, our proprietary Environmental Sustainability Index places Slovakia at rank 69 out of 210 economies, reflecting strengths in energy use and CO₂ emissions per GDP, water stress, as well as its exposure to extreme climate events and its readiness to protect against them. However, there are still structural weaknesses in renewable electricity output and the recycling rate.

Overall systemic political risk is relatively low. Slovakia remains a stable democracy with firmly anchored EU, NATO and OECD membership, supporting predictable foreign-policy alignment. However, government stability has weakened somewhat in recent years, delaying reform momentum. The left-nationalist coalition led by Robert Fico — which returned to power after the September 2023 elections — has taken a more Eurosceptic and interventionist approach than its predecessor. Governance challenges intensified following the assassination attempt on Prime Minister Fico in May 2024, after which Interior Minister Robert Kaliňák temporarily assumed day-to-day duties. Fico has since resumed office and the coalition remains intact. Relations with Brussels have grown strained, with the European Commission warning that judicial reforms, criminal code amendments and changes affecting prosecutors and public media risk weakening the rule of law. Several infringement procedures are underway and EU authorities have signalled that funding conditionality or temporary suspensions cannot be ruled out if reforms diverge from EU standards. While political polarisation and confrontational domestic politics are likely to persist, broad public support for EU and NATO membership ensures that systemic political risks remain contained.