Middle East, Far-Reaching Consequences (June 2026)

The conflict in the Middle East has caused a shock to global energy prices. This will also dampen the performance of the Slovak economy, and GDP will increase by 0.8% in 2026. From 2027, however, we expect a gradual recovery, with GDP rising by 1.5%. Growth will be driven mainly by exports from the new Volvo car plant. Consumer inflation will reach 3.9% this year, but will fall to 2.7% next year. Economic performance will be supported by public investment, while other components will stagnate. A higher contribution from net exports will merely reflect lower investment and consumption imports. Labour-market tightness will ease and the total number of employees will decline slightly. Adverse demographics will limit job creation throughout the forecast horizon, at the end of which the economy will be supported by the final drawdown of EU funds. The risks to the forecast are more balanced. The conflict in the Middle East may slow economic activity, but an early resolution would ease inflationary pressure. Completing the drawdown of the Recovery and Resilience Plan will be a challenge, while benefits may arise from the transmission of Germany’s fiscal stimulus to the Slovak economy.