GDP growth in the first quarter of 2025 showed a year-on-year increase of 2.2%, maintaining stability in quarter-on-quarter terms compared to the previous quarter’s figures of 2.5% year-on-year and 0.8% quarter-on-quarter. The full-year growth for 2024 was recorded at 2.3%.
Consumer spending remained a significant contributor to economic growth, with private consumption rising by an average annual rate of 1.9% year-on-year, adding 1.3 percentage points to GDP growth in the first quarter of this year. This trend was supported by strong labor market conditions, as indicated by a rise in labor compensation by 6.4% year-on-year, a decrease in the unemployment rate to 8.8%, and an increase in consumer credit growth by 5.6% as of March.
Inventories played an essential role in GDP dynamics, contributing 1.6 percentage points to the year-on-year GDP change in the first quarter, down from three percentage points in the previous year due to robust demand conditions and preemptive stockpiling.
A notable surprise was the decline in gross fixed capital formation (GFCF), which fell by 3.2% year-on-year and experienced its most significant drop since early COVID-19 lockdowns due to decreases in construction activity across both residential and non-residential sectors.
Several factors contributed to GFCF weakness, including large investment projects classified under inventories during construction phases and lower-than-planned expenditure through PIB & RRF programs.
Persistent negative effects on GFCF were identified, such as labor shortages, high construction costs due to increased building material prices since 2021, and high land values correlating with surging real estate valuations.
Encouragingly, estimates from the NBG nowcasting model suggest accelerating GDP growth for Q2:2025 with a projected quarterly increase of +0.5%. However, FY:2025 growth faces challenges despite support from expansionary fiscal and monetary policies.
