GDP growth hits two-year low in Q1

Economic growth decelerates: According to a preliminary estimate, GDP growth unexpectedly lost momentum, falling to 0.9% year on year in the first quarter from 1.7% in the fourth quarter of last year and marking the slowest expansion since Q1 2023. On a seasonally adjusted quarter-on-quarter basis, economic activity flatlined in Q1, following the previous quarter's 0.5% increase and marking the worst reading since Q2 2022.

Softer private spending growth drives the result: According to the statistical office, a deceleration in private consumption drove the slowdown in annual GDP growth in Q1, likely weighed by political turmoil plus higher VAT. Moreover, the statistical office noted that fixed investment remained in the doldrums. A complete breakdown will be released on 6 June.

Economy to lose steam: Annual GDP growth should gain some steam from Q1 in Q2, as softer inflation provides some relief to private consumption. That said, U.S. car tariffs are likely to drag on the result. In 2025 as a whole, the economy is on track to slow for a second straight year, reinforcing a downtrend that is becoming harder to ignore. The erosion of real wages will continue to squeeze household budgets, while fiscal consolidation will keep a tight lid on public spending. Meanwhile, deteriorating ties with the EU will likely curb fixed investment. That said, Slovakia’s economy is expected to outpace the Euro area average.

Panelist insight: Commenting on the outlook, Matej Hornak, analyst at Erste Bank, stated: “The threat of tariffs and a potential trade war creates substantial uncertainty for the business environment and economic forecasts. Further actions by the U.S. president and the EU will be key to economic activity, particularly for the Slovak economy, as exports and trade—most notably in the automotive sector—support thousands of jobs. For that reason, the impact on the Slovak economy will not only be direct, due to lower exports to the United States, but also indirect, resulting from a slowdown among our trading partners, especially Germany. Overall, the impact of high tariffs on cars could reduce Slovak GDP growth by around 1.5 percentage points over a three-year horizon. In the case of general reciprocal tariffs, the total negative impact could double, reaching 2.5–3.0 percentage points.”

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