Although the Government of the Slovak Republic declares fiscal consolidation as its priority, it lacks a multi‑year strategy outlining a credible path towards permanent deficit reduction from the outset. Such a strategy should clearly define the scope of measures on both the revenue and expenditure sides and assess their impact on growth. With greater discipline in implementing measures, Slovakia could already be nearing the end of the consolidation process—at least in terms of halting debt growth relative to GDP. Currently, however, this end is not in sight. Given that Slovakia is not currently experiencing a significant economic crisis, this may represent a missed opportunity.
The CBR stresses that consolidation should be significantly concentrated in 2026 and not postponed to 2027, when the likelihood of meaningful fiscal improvement is considerably lower. This applies both due to the political cycle and the expected state of the economy, as well as the availability of EU Recovery and Resilience Plan funds.
In practice, expenditure savings tend to be the residual outcome of the budget process, while consolidation to date has relied primarily on increases in taxes and social contributions—even though the room for further increases is now very limited. The government has avoided reforming transfers, such as by improving targeting. Introducing new spending measures that offset the effects of consolidation measures prolongs the process and raises the risk of losing public support. Debt and interest costs continue to rise, and a prolonged period of uncertainty emerges, during which businesses and households face increasing difficulty planning for the future. This also dampens economic growth in the years ahead.
Relying solely on economic growth as the main tool for stabilising the debt is no longer sufficient. The current growth potential will not keep pace with the rate of expenditure growth. Economic growth is weak, and the structure of measures often inhibits it, reducing Slovakia’s competitiveness in international comparison. The government bears responsibility for the quality of these measures and their impact on public finances.
Government’s Budget Proposal
The general government budget proposal for 2026–2028 (GGBP) was approved by the government on 10 October 2025. It was immediately submitted to the ongoing 40th session of the National Council of the Slovak Republic[1].
Due to the persistently poor state of public finances and with regard to the requirements of the European fiscal rules, the government included a package of consolidation measures in the budget proposal, primarily on the side of tax and social contribution revenues. This package, with some exceptions, was approved by the National Council in September 2025. The adopted measures allow the government to target a year‑on‑year deficit reduction for 2026; however, they remain insufficient for stabilising the debt and achieving a lasting recovery of public finances.
Compared to the originally budgeted general government deficit of 4.7% of GDP for 2025, the government currently estimates a deficit of 5.0% of GDP. For 2026, the budget proposal targets an improvement to the deficit to 4.1% of GDP. Subsequently, the proposal expects the deficit to increase to 5.0% of GDP in 2027 and fall to 4.6% of GDP in 2028. At the same time, however, the government declares an intention to reach a general government deficit of 3.5% of GDP in 2027 and 2.8% of GDP in 2028, the next election year, while no specific measures to achieve these targets are currently identified.
According to the government’s original estimate, the consolidation measures were expected to reduce the 2026 deficit by EUR 2.7bn (1.9% of GDP). Almost half of the measures (EUR 1.3bn) were on the expenditure side; however, this amount also included the effect of compensating energy subsidies by replacing other expenditures with EU funds amounting to EUR 420mn (0.3% of GDP). Following changes in the government’s discussions, the budget proposal no longer explicitly assumes this compensation. As a result, the final consolidation contribution to the 2026 budget, according to the government’s assumptions, amounts to EUR 2.3bn (1.6% of GDP).
According to the budget proposal, gross debt is expected to rise from 59.3% of GDP in 2024 to 64.0% of GDP in 2027, followed by a slight decline to 63.9% of GDP at the end of 2028, assuming the budgetary objectives are met—although specific measures to meet them are still lacking. The increase is mainly driven by high deficit levels expected over the medium term. Regardless of the expected debt trajectory, since 2020 the debt has exceeded the upper limit of the sanction brackets under the constitutional act and, according to the government, will remain above this limit throughout the entire forecast period.
Under the presented fiscal framework (i.e., after incorporating the measures introduced so far), debt will continue to rise from 61.5% of GDP in 2025 to 65.7% of GDP by the end of the election term. This implies that with this budget proposal the government still does not comply with the applicable debt‑brake sanction requiring the submission of measures ensuring debt reduction.
The budget proposal contains the public expenditure ceiling for 2026–2028, calculated by the Ministry of Finance under the Budgetary Rules Act in accordance with the European fiscal rules resulting from the reform of the Stability and Growth Pact. The amount of the ceiling for 2026–2028 is derived from the maximum permitted growth in net expenditures set by the government in the National Medium-Term Fiscal-Structural Plan of the Slovak Republic for 2025–2028.
According to the government, the general government expenditures included in the budget proposal meet the ceiling only in 2026, exceeding it by EUR 600mn in 2027 and EUR 617mn in 2028. The government also estimates that the ceiling will be met in 2025.
The CBR’s evaluation
- The year 2025 is the baseline year for preparing the General Government Budget Proposal for 2026–2028. Based on currently available information, the deficit in 2025 may reach 5.0% of GDP, according to the Council. Compared with the government’s current estimate, this represents approximately the same starting position (the deficit estimated by the Council is higher by 0.01% of GDP).
- In its fiscal forecast, the CBR estimates the contribution of the consolidation package to deficit improvement in 2026 at EUR 1.6bn (1.1% of GDP). The vast majority—amounting to 1.0% of GDP—comes from measures affecting the structural balance, while temporary consolidation measures amount to 0.1% of GDP. This positive impact of consolidation measures is only partially reflected in deficit improvement, as it is offset by the negative effect of other measures adopted in 2025 (impact of 0.3% of GDP)[2] and in previous periods (0.3% of GDP)[3] as well as temporarily faster growth in investment outside defence (0.2% of GDP)[4].
In 2026, the deficit may reach 4.6% of GDP, according to the Council’s estimate—exceeding the government’s budget target by 0.5% of GDP (EUR 656mn). From this perspective, and based on currently available information, the intention to achieve a deficit of 4.1% of GDP in 2026 cannot be considered realistic.
- Within the budget structure, the CBR identified the following negative risks:
- Shortfall in tax and social contribution revenues (EUR 429mn): Based on its tax forecast, which reflects the current macroeconomic outlook, the CBR expects lower revenues compared with the budget, especially in labour taxes (EUR 237mn), corporate income tax (EUR 171mn), and VAT (EUR 85mn). The shortfall is partially offset by higher expected withholding tax revenue (EUR 34mn), excise duties (EUR 31mn), and the levy on regulated industries (EUR 26mn).
- Higher defence expenditure (EUR 226mn): Based on the current expected delivery schedule of military equipment—including five F-16 fighter jets to be delivered by the end of 2026—the CBR estimates defence investment at EUR 1.3bn in 2026. As these costs relate to ongoing projects, any potential “savings” would in practice only shift the deficit impact to future years.
- Deficit financing of local governments (EUR 212mn): The year 2026 is a municipal election year. Historically, election years have been associated with faster expenditure growth and weaker fiscal discipline. Therefore, the CBR does not expect the EUR 130mn in local government savings assumed by the government under consolidation; rather, it estimates temporarily faster expenditure growth.
- Higher healthcare expenditure (EUR 115mn): The CBR’s forecast is based on slightly higher estimated healthcare spending in 2025, which carries forward into subsequent years. The CBR also assumes only half of the healthcare savings (EUR 232mn) planned outside the consolidation package will materialise.
- These negative risks are partially offset by the following positive deviations:
- Lower current expenditures of the state budget (EUR 155mn): The level of wage and goods-and-services spending expected by the CBR is lower than budgeted. The forecast already incorporates adopted measures, but only partially reflects savings included in consolidation.
- Partial compensation of energy subsidy costs (EUR 260mn): After changes during government negotiations, the budget proposal includes EUR 420mn for energy subsidies without explicitly assuming compensation via EU funds. The CBR estimates that half of this amount will be compensated, reducing the deficit impact by EUR 210mn. The CBR also expects total energy subsidy costs to be lower (EUR 370mn vs. EUR 420mn).
- In subsequent years, the Council estimates that the deficit will rise to 4.8% of GDP in 2027 and 5.3% of GDP in 2028. In 2027, the CBR estimate is 0.3% of GDP lower than the government’s projected deficit, while in 2028 it is 0.7% of GDP higher. Moreover, relative to declared government targets, specific measures are lacking in the amount of 1.3% of GDP in 2027 and an additional 1.2% of GDP in 2028.
- According to the Council’s estimate, the structural deficit will reach 5.1% of GDP in 2025, worsening by 0.6% of GDP compared with the previous year. The main reason for this deterioration is the expected increase in defence expenditure, which will reach 2.3% of GDP in 2025 and, according to the CBR, will remain around 2% of GDP over the medium-term horizon. This means that the deterioration in the structural deficit compared with 2024 will be largely permanent.
- In 2026, the CBR expects the structural deficit to improve by 0.5% of GDP to 4.6% of GDP, mainly due to the adopted consolidation measures. However, over the medium term, rising interest costs [5], and the expiry of earlier temporary measures with a positive impact on the balance[6] will lead to a renewed increase in the structural deficit. Without additional measures, the structural deficit will remain around 5% of GDP in 2027–2029, reaching 5.2% of GDP in 2029.
- The CBR estimates that gross debt will rise from 59.3% of GDP in 2024 to 61.7% of GDP in 2025, and further to 64.3% of GDP in 2026. Without continued consolidation beyond 2026, debt would continue increasing sharply, reaching 72.4% of GDP by the end of 2029. Net debt would rise by 15.3 p.p. compared with 2024, reaching 66.3% of GDP in 2029.
- To stabilise gross debt, the general government deficit would need to be reduced to approximately 2.5% of GDP. If deficit reduction[7] proceeded gradually to this level, the upward trend in gross debt would stop at around 66% of GDP.
- Given the gradual decline in debt-brake sanction thresholds, the latest debt projection implies that debt will remain far above the upper limit of the debt brake, exceeding it by almost 22.4 p.p. in 2029. Such deviations are historically unprecedented. Currently, due to the 24‑month exemption[8] only the sanctions linked to overrunning the second bracket are applicable (requiring the government to submit debt‑reduction measures and to freeze ministers’ salaries). After the exemption expires, the government will be required, after 21 November 2025, to request a vote of confidence in the National Council without delay.[9].
- Within the framework of the reformed European fiscal rules, the government committed to ensuring that the cumulative growth of net expenditures reaches a maximum of 14.8% during 2024–2028. At the time the plan was approved, the CBR already considered this growth rate to be excessively lenient[10]. Moreover, in July 2025, the EU Council approved, at the government's request, an escape clause for defence expenditures. During 2025–2028, Slovakia may therefore increase defence spending by up to 1.5% of GDP annually (compared with the 2021 level of 1.4% of GDP), and this additional expenditure will be taken into account when assessing compliance with the rule.
- According to the CBR, meeting the maximum permitted growth of net expenditures combined with the use of the escape clause would not lead to a sustainable reduction of the deficit below 3% of GDP nor the debt below 60% of GDP within ten years after the implementation of the consolidation plan—contrary to the fundamental objectives of the reformed fiscal framework. On a positive note, achieving the government's stated targets would result in a lower expenditure growth rate than the maximum permitted; however, this would still be insufficient to stabilise the debt.
- According to the CBR’s estimate, the general government budget proposal contributes 0.2% of GDP to improving the long-term sustainability indicator. The positive contribution of the consolidation package (0.7% of GDP) is dampened by additional expenditures, particularly wage indexation in the education sector (0.3% of GDP) and higher healthcare spending (0.2% of GDP). However, the value of the long-term sustainability indicator for 2025 may not improve year-on-year, as it will also be influenced by additional factors, particularly the worsened economic outlook and a higher deficit in 2025.
- The most significant shortcoming from the perspective of transparency is the approval process of the budget, which is disproportionately short given the importance of the document [11]. This severely limits the ability of the CBR[12] and the Supreme Audit Office [13] to independently inform the public as well as members of the National Council before the budget is approved.
- In terms of the transparency of the budget proposal itself, the CBR did not identify any major improvements compared with last year’s document. The total amount of tax revenues in the budget proposal is consistent with the forecast approved by the Tax Revenue Forecasting Committee; however, it differs from the actual legislative state in force at the time of approval[14]. A persistent shortcoming is the failure to prepare the budget proposal in line with the government’s fiscal targets for 2027 and 2028, as no specific consolidation measures are provided for those years. The proposal also lacks a transparent overview of expenditure-side measures related to state savings due to the absence of a comparative baseline (no-policy-change scenario).
