## IMF Executive Board Concludes 2023 Article IV Consultation with Slovak Republic

_IMF News, March 13, 2024_

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## Bibliographic details
- Published: March 13, 2024

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### Overview
- Executive Board concluded the Article IV consultation with the Slovak Republic on March 6, 2024.
- 2023 slowdown: drawdown of pandemic-era savings and negative real wage growth weighed on consumption.
- Partial offsets in 2023: strong fiscal stimulus (increased social spending and measures to offset higher energy prices) and record-high EU-funded public investments.
- Inflation: declined from record-highs in early 2023 but remains among the highest in the euro area.
- Risks: tilted firmly to the downside — weaker external demand, commodity price shocks, delays in fiscal consolidation, slow implementation of structural reforms, and failure to absorb EU grants effectively.
- Structural challenge: unfavorable demographics will weigh on medium-term growth.

### Outlook and Projections
- Growth forecasts:
  - 2024: 2.1 percent
  - 2025: 2.6 percent
- Inflation path: projected to continue moderating and return to target by end-2026.
- Growth drivers: rebound in consumption from a pick-up in real wage growth, recovery in exports as supply conditions improve, offsetting deceleration in EU-funded public investment.

### Executive Board Assessment — Major Messages
- Directors welcomed the resilience of the Slovak economy and looked forward to envisaged stronger growth in 2024.
- Outlook is broadly favorable but clouded by high inflation and significant downside risks, including a global slowdown, intensifying geopolitical tensions, and longstanding structural and demographic challenges.
- Priority areas: fiscal sustainability and structural reforms to foster economic diversification, inclusive growth, and green transition.

### Fiscal Policy and Public Finance — Recommendations
- Sustain commitment to fiscal consolidation to put debt on a downward trajectory, rebuild buffers, and prepare for increases in aging‑related spending.
- Recommendation for more ambitious fiscal consolidation in 2024, with clearly identified revenue and expenditure measures in subsequent years.
- Specific revenue and tax measures encouraged:
  - Consider raising the basic VAT rate.
  - Consider raising property and environmental taxes.
- Expenditure-side recommendations:
  - Better targeted social spending.
  - Reduction in subsidies.
- Governance and framework:
  - Reform the fiscal framework to strengthen fiscal transparency and credibility and boost the longer‑term outlook for public finances.

### Financial Sector and Macroprudential Policy
- Directors welcomed the resilience of the financial sector and considered the current macroprudential stance appropriate.
- Monitoring needs: vulnerable segments of the credit portfolio, including the commercial real estate sector and low‑income households.
- Possible actions:
  - Consider adding macroprudential measures targeted at the commercial real estate sector.
  - Authorities should stand ready to release the countercyclical capital buffer if downside macro‑financial risks materialize.
- Other priorities: address remaining deficiencies in the AML/CFT framework and strengthen resilience to cyber‑attacks.

### Structural Reforms, RRP, and Labor Market
- Urged continued implementation of the national Recovery and Resilience Plan to raise inclusive and climate‑friendly growth.
- Labor market policies needed to raise labor force participation of women and seniors.
- Investment and inclusion measures:
  - Increased infrastructure investments and better absorption of EU funds.
  - Maintain good governance and a favorable investment climate.
  - Educational reforms to lift growth potential, reduce regional inequality, and foster inclusion of minorities.
- Environmental progress: commended significant progress in reducing greenhouse gas emissions and welcomed implementation of the 2023 National Energy and Climate Plan.

### Key Economic Indicators (selected, as reported)
- Real GDP (annual percent change):
  - 2019: 2.5
  - 2020: -3.3
  - 2021: 4.8
  - 2022: 1.8
  - 2023: 1.1
  - 2024 (proj.): 2.1
  - 2025 (proj.): 2.6
  - 2026 (proj.): 2.8
  - 2027 (proj.): 2.7
- Domestic demand (annual percent change):
  - 2019: 3.8
  - 2020: -5.1
  - 2021: 5.6
  - 2022: 2.9
  - 2023: -4.7
  - 2024 (proj.): 5.3
  - 2025 (proj.): 2.2
  - 2026 (proj.): 2.4
- Inflation (HICP, end of period):
  - 2023: 15.0
  - 2024 (proj.): 6.6
  - (Staff projects return to target by end-2026)
- Core inflation (end of period):
  - 2023: 13.7
  - 2024 (proj.): 6.8
- Public finance (percent of GDP):
  - Revenue 2023: 41.5
  - Revenue 2024 (proj.): 41.0
  - Revenue 2025 (proj.): 40.0
  - Expenditure 2023: 47.9
  - Expenditure 2024 (proj.): 47.0
  - Expenditure 2025 (proj.): 46.2
  - Overall balance 2023: -5.6
  - Overall balance 2024 (proj.): -5.7
  - Primary balance 2023: -4.4
  - Structural balance (percent of potential GDP) 2023: -5.3
  - General government debt (percent of GDP):
    - 2019: 48.0
    - 2020: 58.9
    - 2021: 61.1
    - 2022: 57.8
    - 2023: 57.9
    - 2024 (proj.): 59.3
    - 2025 (proj.): 60.3
    - 2026 (proj.): 63.5
    - 2027 (proj.): 66.7
    - 2028 (proj.): 69.8
    - 2029 (proj.): 72.5
- Gross external debt (percent of GDP):
  - 2019: 112.3
  - 2020: 119.6
  - 2021: 134.2
  - 2022: 103.1
  - 2023: 99.5
  - 2024 (proj.): 100.7
  - 2025 (proj.): 101.2
  - 2026 (proj.): 102.5
  - 2027 (proj.): 103.8
  - 2028 (proj.): 104.6
  - 2029 (proj.): 105.1
- Gross national savings (percent of GDP):
  - 2019: 20.5
  - 2020: 20.0
  - 2021: 19.7
  - 2022: 15.2
  - 2023: 15.3
  - 2024 (proj.): 16.3
  - 2025 (proj.): 17.6
  - 2026 (proj.): 18.7
  - 2027 (proj.): 19.3
  - 2028 (proj.): 20.6
- Nominal GDP (Millions of euros):
  - 2019: 94,430
  - 2020: 93,444
  - 2021: 100,256
  - 2022: 109,645
  - 2023: 122,114
  - 2024 (proj.): 130,572
  - 2025 (proj.): 139,175
  - 2026 (proj.): 146,498
  - 2027 (proj.): 153,399
  - 2028 (proj.): 160,613
  - 2029 (proj.): 168,203

*Source: IMF Press Release No. 24/85 — IMF Executive Board Concludes 2023 Article IV Consultation with Slovak Republic (March 13, 2024).*

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## References

- [Slovak Republic and the IMF](http://www.imf.org/external/country/SVK/index.htm)
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_Source: https://www.imf.org/en/news/articles/2024/03/12/pr2485-slovak-republic-imf-exec-board-concludes-2023-art-iv-consult_