Expansionary monetary and fiscal policies made important contributions to the economic upturn in 2001. With robust growth expected through 2003, changes in the macroeconomic stance appear to be necessary. This chapter begins with an analysis of monetary and exchange rate policies. Favourable inflation outcomes and the relative stability of the Slovak koruna suggest that the National Bank of Slovakia (NBS) has been successful thus far in establishing the credibility of its monetary policy. The following section addresses fiscal policy. Despite the progress made in reducing spending as a share of GDP since 1998 and in cutting tax rates from high levels, the large deficit -- estimated at 6 ½ per cent of GDP (on an ESA95 basis) in 2001 – and the significant rise in public debt raise serious concerns. Limiting the growth of expenditures and reducing the deficit, while allowing further declines in tax rates, requires fundamental reform of the pension, health and social welfare systems. The chapter concludes with a brief assessment of macroeconomic policies...