After falling significantly during the crisis, real GDP growth is recovering swiftly, helped by a pick-up in demand in Slovakia’s main trading partners. Unemployment rose substantially during 2009 and in early 2010 and the overall crisis-induced increase is now higher than on average in the OECD. The main challenge is to prevent a further build-up of long-term unemployment, which was already very high before the crisis. This will require reviewing the existing labour market programmes and ensuring wage flexibility by reforming minimum wage regulations and legal extension of wage contracts. The budget deficit has risen to around 8% of GDP, and the government is planning a major consolidation effort. The focus should be on containing government spending, including by implementing important reforms to the first pillar of the pension system. Phasing out tax exemptions and raising taxation of immobile bases should also be considered. In addition, fiscal institutions should be strengthened.