Slovak Financial Market: Overview, Challenges and Outlook

The Slovak economy is currently growing slowly, with real GDP growth falling below 1%. This development is driven by a combination of external factors, such as tariffs from the USA and weak performance from key trading partners (especially Germany), as well as domestic measures such as tax increases. The Ministry of Finance recently introduced a third consolidation package worth 2.7 billion euros, as the budget deficit is expected to exceed 5%. The measures taken so far focus primarily on increasing revenues — raising VAT, introducing a tax on extraordinary banking profits (starting January 2024), and a financial transaction tax (starting April 2025).

The increase in taxes has contributed to inflation rising above 4%, which is among the highest in the Eurozone. This reduces the purchasing power of households, although this impact is partially offset by a strong labor market, low unemployment, and rising real wages. Companies are facing higher tax burdens and legislative changes, particularly concerning the financial transaction tax. Additionally, the reduction of key interest rates supports the demand for loans, especially mortgages.

On 1 April 2025, the Slovak Republic introduced a transaction tax as a tool to consolidate public finances without directly adjusting income tax rates. The tax applies to outgoing financial operations of business entities — specifically bank transfers (0.4% of the amount, capped at 40 €), cash withdrawals (0.8%), and card usage (2 € annually per card). Exceptions include tax payments, intra-account transfers, and selected public or non-profit entities, provided they report their transaction account to the bank in advance.

The implementation of this legislation at Tatra banka required considerable resource allocation and operational effort. A dedicated working group was formed to design and deploy a complex technical solution within an extremely short timeframe, while simultaneously adapting to ongoing legislative amendments introduced even after the law came into force. Such unsystematic measures, adopted without sufficient foresight or consultation with industry stakeholders, pose risks to the stability and efficiency of the financial sector. The full impact of the transaction tax has not yet manifested in the Slovak economy. Slovakia’s experience may serve as a relevant analytical reference for countries considering similar legislative initiatives.

The financial sector faces challenges not only indirectly—through clients—but also directly, as some measures target financial institutions. The tax on extraordinary bank profits has a direct impact on the sector's profitability, while the proposed subsidy for mortgage loans and the financial transaction tax increase the regulatory burden on banks. Tatra banka is proving to be resilient to crises and a leader in profitability and innovation. The bank has successfully navigated challenges such as the COVID-19 pandemic, the energy crisis, and inflation. In 2024, it received the award for the most innovative digital bank in the CEE region and launched the Global FinTech Scout Programme in collaboration with the RBI Group.

Slovakia's membership in the EU and NATO provides stability in monetary policy and interest rates. Despite the slowdown in real GDP growth, nominal growth remains strong (~5%), which supports the expansion of loans. The industrial sector is robust and attracts investments, such as the arrival of the fourth car manufacturer in 2026 and the expansion of the defense industry since 2022. The potential for growth also includes the future integration of Ukraine into the EU, which could bring new opportunities for eastern Slovakia.

Slovak banks are well-positioned to deliver sustained growth and profitability over the next five years. With ECB deposit rates expected to remain anchored at 2% and nominal loan growth projected to stay robust, the sector benefits from a solid macro-financial foundation. Portfolio quality remains high, as evidenced by persistently low levels of non-performing loans. The dominance of fixed-rate mortgages, repriced gradually over time, combined with the modest gap between peak and current ECB rates, supports resilient net interest income with room for further growth. Additionally, the phased reduction of the windfall tax from 30% in 2024 to just above 4% by 2028 provides a further boost to sectoral profitability.

Slovak banks apply ESG principles in line with European standards and comply with relevant regulations, supported by the sustainability strategies of their parent institutions. Major banks are subject to CSRD reporting, already embedded in Slovak legislation, and have published 2024 Sustainability Reports outlining ESG KPIs and targets. An ESG committee within the Slovak Banking Association coordinates efforts to standardize ESG data collection from corporate clients. Tatra banka stands out for its proactive ESG engagement, particularly in client education across corporate and individual segments, with a focus on youth and students.