Country Risk Report

Slovakia

Last update – January 2026

Country rating

LOW RISK FOR ENTERPRISE

Economic risk

Business environment risk

Political risk

Commercial risk

Financing risk

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Form of state	Parliamentary Democracy
Head of government	Robert FICO (Prime Minister)
Next elections	2027, legislative

Strengths & weaknesses

EU, NATO and OECD membership underpin policy stability
Resilient investment outlook
Business environment well above average with strong institutional features

High exposure to external shocks and tariff changes
Small domestic market
Public debt breached 60% threshold

Economic overview

Cyclical risks

After stagnating in 2024, Slovakia’s recovery remains sluggish, with activity held back by a weak external environment and the drag from fiscal consolidation. Real GDP is expected to expand only modestly in 2026, at around +1.4%, before gradually firming to around +2.0% in 2027, supported by a strengthening global economy, a gradual pick-up in domestic demand and continued deployment of EU funds. Private consumption should slowly recover as inflation moderates and purchasing power improves, though higher taxes and consolidation measures will constrain household incomes in the near term. Investment is set to remain resilient, boosted by EU funding, public spending and the expected launch of production at a new automotive plant.

External conditions remain a key driver of near-term performance. Export activity has been volatile — stronger at the start of 2025 owing to front-loading ahead of tariff changes but contracting in H2 2025 as higher US tariffs fed through. Slovakia is highly exposed to direct and indirect tariff effects through its automotive sector. Trade is expected to remain subdued through 2026 before rebounding in 2027 as foreign demand improves.

Labor market conditions are softening but remain tight by historical standards. Employment is expected to decline modestly due to weaker activity, consolidation measures and adverse demographics, with unemployment edging up toward 5.6% in 2026–27. Wage growth is projected to slow, turning negative in real terms in 2026 before recovering in 2027.

Inflation continues to decline, driven by fading energy and commodity shocks and softer domestic demand. However, price pressures will stay elevated as the restructuring of energy support mechanisms lifts household energy costs. Headline inflation is expected to average around 3.2% in 2026, before easing further to around 2.4% in 2027 as wage pressures moderate and administered price effects dissipate.

Financing risks

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.

Structural business environment risks

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.

Political risks

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.

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