IMF says Slovakia needs to put debt on downward path By Reuters

(Reuters) – Slovakia needs fiscal consolidation efforts to put its debt on a downward trajectory, the International Monetary Fund said in a report on Wednesday.

Slovakia’s budget deficit ballooned in 2023 amid pre-election spending promises and state help for people hit by high energy prices.

Leftist Prime Minister Robert Fico, who won a September election to return to power after years in opposition, has set a slow pace of consolidation this year as the government seeks to maintain living standards and avoid any sharp fiscal pullback.

The IMF forecasts government debt to grow to 59.3% of gross domestic product in 2024, from an estimated 57.9%, before climbing past 60% in the coming years.

“Directors underscored the need for sustained commitment to fiscal consolidation, stressing the importance of putting debt on a downward trajectory, rebuilding buffers, and preparing for the increase in aging-related spending,” the IMF said in a press release after its executive board concluded 2023 Article IV consultations.

“A more ambitious fiscal consolidation in 2024, coupled with clearly identified revenue and expenditure measures in the years ahead, should underpin these efforts.”

The IMF directors also said Slovakia should consider raising basic value-added taxes and other tax rates.

In early December, Fitch ratings agency cut Slovakia’s debt rating by one notch to ‘A-‘ with a stable outlook, citing deteriorating public finances and an unclear consolidation path.

The IMF expects the Slovak economy to grow by 2.1% this year and by 2.6% in 2025 after a slowdown to 1.1% expansion in 2023 when high inflation sapped consumer activity – a blow cushioned by the increase in government spending.