The economy in the shadow of trade barriers (June 2025)

The increase in tariffs and global uncertainty in the world economy will slow down Slovakia’s GDP growth in 2025 to 1.3%. The decline in foreign demand will affect exports and employment. Although real incomes will rise slightly, households will save, and their consumption will be limited due to public finance consolidation. Businesses will delay investments, but capital formation will be supported by drawing funds from the Slovakia’s Recovery and Resilience Plan (RRP). In 2026, GDP growth will increase to 1.6% as uncertainty around customs policy dissipates. However, the recovery in foreign demand will be partial as global trade adjusts gradually, and supply chains may be disrupted. In 2027, we expect a slowdown in investment activity after the full utilization of RRP funds, but EU funds will help support investment towards the end of the forecast period. Risks to the forecast include global trade uncertainty and geopolitical tensions, which may drive up energy and agricultural commodity prices, but will not translate into higher income for the economy, households, or the Slovak state budget.