Strengthening public finances as a pillar of prosperity in the Slovak Republic

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The Slovak Republic’s public debt is on track to rise from 61% of GDP in 2025 to over 100% of GDP by 2040 without further action. Consolidation should rely mainly on expenditure control and a strengthened fiscal framework. Crucially, fiscal adjustment should be combined with structural reforms that raise employment: doing so halves the fiscal consolidation required to reduce debt while boosting growth.

by Boris Cournède, OECD Economics Department

Fiscal adjustment is required to put public debt on a stable trajectory in the Slovak Republic, as noted in the 2026 OECD Economic Survey of the Slovak Republic (OECD, 2026a). From a recorded 4.5% of GDP in 2025 and an anticipated 4.3% in 2026, the general government deficit needs to narrow substantially to curb public debt. Rapid ageing implies increases in public expenditure on pensions, health and long-term care. Defence commitments are adding to spending needs. On unchanged tax and spending structures and without new structural reforms, public debt is set to rise from 61% of GDP at the end of 2025 to above 100% of GDP in 2040 (Figure 1).

Figure 1. Combining fiscal consolidation with structural reforms can stabilise public debt
General government debt, ratio to GDP, %

Notes: In the scenario with an unchanged tax and expenditure structure, the primary balance evolves because of changes in (1) spending on public pensions, and health and long-term care, taken from the EU Ageing Report 2024, and (2) the employment-to-population ratio. GDP follows the central scenario of the OECD Economic Outlook long-term baseline. The scenario combining fiscal adjustment with structural reform includes a 2.4 percentage points of GDP improvement in the primary balance and the illustrative reform estimates presented in Box 1.1 of the Survey. Interest rates are derived endogenously in each scenario.
Source: 2026 OECD Economic Survey of the Slovak Republic.

The greater part of fiscal adjustment in 2024-2026 has relied on collecting more revenue. Between 2024 and 2026, the ratio of government revenue to GDP rose by 1.6 percentage points while spending excluding interest rose by 0.4 percentage points according to OECD Economic Outlook estimates (OECD, 2026b). The small increase in the ratio of government spending to GDP does not however imply an absence of spending-side restraint. It means that the trend increase in spending has been larger than the impact of measures to curb expenditure.

With taxes and social security contributions that are already above the OECD average as a ratio to GDP, the Slovak Republic needs to rely more on expenditure control. A starting point is to end natural gas subsidies: in addition to budgetary gains of at least 0.3% of GDP, their removal would sharpen incentives to save energy and reduce carbon dioxide emissions. Savings could also come from strengthening the evaluation of reimbursed drugs and promoting the use of generic and biosimilar drugs. Furthermore, means-testing the thirteenth pension would also help reduce spending. The OECD Economic Survey of the Slovak Republic 2026 lays out additional avenues for expenditure control.

Looking beyond medium-term adjustment, strengthening the fiscal framework is a way of entrenching sound fiscal policy for the long term. The Slovak Republic has a record of establishing ambitious budgetary institutions with its constitutional debt brake introduced in 2011 and its Council for Budget Responsibility (CBR) established in 2012. The CBR is widely regarded as independent, non-partisan and with strong analytical skills. The fiscal framework can be enhanced by:

• Designing multi-year fiscal consolidation plans based on a well delineated baseline with adjustment measures to be deployed if outturns deviate from the baseline. This would improve on current consolidation packages, which are vulnerable to implementation and economic risk.
• Reforming the debt brake by giving it a longer horizon and reducing exemption periods and clauses. In its current design, the debt brake is calling for unrealistic trajectories when the deficit is large: it would have implied aiming at a balanced budget in 2026 from a 4.5% deficit in 2025. Simultaneously giving it a long horizon while reducing exemptions would make it more credible.

Sound public finances rest on more than pure fiscal adjustment: they also gain a lot from structural reforms that address the effects of demographic change. The population aged 15-64 is set to shrink by 30% over 2025-2065, implying a sharp rise in the ratio of older to working-age people (Figure 2).

Long-term debt simulations underline the worth of debt stabilisation strategies that combine fiscal consolidation with reforms that boost employment. If fiscal adjustment were to be implemented alone, the primary balance would need to improve by as much as 5.1 percentage points of GDP from its projected 2027 level to bring the debt-GDP ratio to 40% by 2040. The required adjustment to reduce debt to 40% of GDP by 2040 can narrow to 2.4 percentage points of GDP with progress in the employment of women, older workers and Roma people:

• The employment gap between men and women is non-negligible at 8 percentage points, even if below the OECD average. Parental leave for mothers is among the longest in the OECD, and the supply of early childcare is relatively limited. In this environment, most mothers take care of their young children at home. The length of parental leave entitlement should be reduced, and on-going efforts to expand childcare should intensify.
• Many OECD countries have achieved much greater employment of women and men above 55 than is currently the case in Slovakia. A 2024 reform tightened conditions and increased penalties for early retirement but early retirement pathways should be curtailed.
• Employment in the Roma community is well below the rest of society. An important factor is high dropout rates throughout the education system. Efforts should be continued to expand early childhood education for students from socially disadvantaged backgrounds and to expand the network of second-chance education.

Fiscal sustainability is about prosperity rather than austerity. While some budgetary adjustments are necessary, the foundation of sound public finances lies in combining a flexible but ambitious fiscal framework with long-term growth-oriented policies.

References

OECD (2026), OECD Economic Surveys: Slovak Republic 2026, OECD Publishing, Paris, https://doi.org/10.1787/ada964c8-en.

OECD (2026), OECD Economic Outlook, Volume 2026 Issue 1: Under Pressure, OECD Publishing, Paris, https://doi.org/10.1787/2d1956f0-en.