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Fitch keeps Slovakia at A– as deficits rise but consolidation continues

Fitch Ratings has affirmed Slovakia’s sovereign credit rating at A– with a stable outlook, saying that eurozone membership and an established macroeconomic framework continue to underpin the country’s credit profile despite persistent fiscal and economic pressures. The ratings agency said on Friday that Slovakia’s public finances remain strained, with the general government deficit widening to 5.5 percent of GDP in 2024, up from 5.3 percent in 2023 and 1.6 percent in 2022, driven by higher spending on wages, pensions, family support, healthcare and defence. Fitch expects the shortfall to ease to 5.1 percent in 2025, helped by a consolidation package that includes a VAT rise from 20 percent to 23 percent, a new financial transaction tax, higher corporate tax rates for large firms, reduced energy subsidies and a halt to public wage indexation. A third fiscal package adopted this year, worth 1.4 percent of GDP, focuses on revenue measures such as higher healthcare contributions and more progressive income taxation, as well as attempts to curb tax evasion. The government targets a deficit of 4.1 percent in 2026, falling to 3.5 percent in 2027 and 2.8 percent in 2028, although Fitch projects a slower improvement, forecasting 4.5 percent in 2026 and 2.8 percent in 2029. Public debt is expected to rise from 59.7 percent of GDP in 2024 to 65.5 percent in 2027, above the A-rated peer median. Slovakia’s long debt maturity will temper refinancing pressures, with interest payments forecast to reach 4.3 percent of revenues by 2027. Growth is set to slow to 0.7 percent in 2025 amid weak external demand and the country’s high exposure to the automotive sector, which accounted for 7 percent of GDP and 40 percent of goods exports in 2024. Inflation is projected to average 4.3 percent next year, partly due to the VAT rise. Fitch said the rating could come under pressure if debt rises faster or growth weakens, while credible long-term consolidation could support an upgrade.

Compiled by Spectator staff •
Fitch keeps Slovakia at A– as deficits rise but consolidation continues

Fitch Ratings has affirmed Slovakia’s sovereign credit rating at A– with a stable outlook, saying that eurozone membership and an established macroeconomic framework continue to underpin the country’s credit profile despite persistent fiscal and economic pressures.

The ratings agency said on Friday that Slovakia’s public finances remain strained, with the general government deficit widening to 5.5 percent of GDP in 2024, up from 5.3 percent in 2023 and 1.6 percent in 2022, driven by higher spending on wages, pensions, family support, healthcare and defence. Fitch expects the shortfall to ease to 5.1 percent in 2025, helped by a consolidation package that includes a VAT rise from 20 percent to 23 percent, a new financial transaction tax, higher corporate tax rates for large firms, reduced energy subsidies and a halt to public wage indexation.

A third fiscal package adopted this year, worth 1.4 percent of GDP, focuses on revenue measures such as higher healthcare contributions and more progressive income taxation, as well as attempts to curb tax evasion. The government targets a deficit of 4.1 percent in 2026, falling to 3.5 percent in 2027 and 2.8 percent in 2028, although Fitch projects a slower improvement, forecasting 4.5 percent in 2026 and 2.8 percent in 2029.

Public debt is expected to rise from 59.7 percent of GDP in 2024 to 65.5 percent in 2027, above the A-rated peer median. Slovakia’s long debt maturity will temper refinancing pressures, with interest payments forecast to reach 4.3 percent of revenues by 2027.

Growth is set to slow to 0.7 percent in 2025 amid weak external demand and the country’s high exposure to the automotive sector, which accounted for 7 percent of GDP and 40 percent of goods exports in 2024. Inflation is projected to average 4.3 percent next year, partly due to the VAT rise.

Fitch said the rating could come under pressure if debt rises faster or growth weakens, while credible long-term consolidation could support an upgrade.

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