📈 Economic activity accelerated, but the acceleration was largely driven by budget spending
🏗️ In the second quarter of 2026, GDP growth accelerated to 4.3%. This was the first quarter with growth above 4% since the post-pandemic quarters of 2021. During this quarter, growth was predominantly driven by construction (21.9%), which, on the expenditure side, was also reflected in the strong growth of gross investment (16.5%). Solid growth rates were also recorded by industry (3.9%) and trade (4.1%), while on the expenditure side, personal consumption grew by 3.3% and exports by 10.4%. This particularly solid growth momentum is associated with at least two critical trends. First, construction was mainly driven by growth in civil engineering (48.9%) and specialised construction works (61.5%), which can be attributed to the implementation of government capital investments at the national and local levels. This activity is crucial for growth but is accompanied by a high budget deficit (7.1% in the first half of the year). Second, the continued growth of personal consumption reflects rising incomes, including wages (nominal growth of 7.3%), household credit (12.1%), and the substantial increase in pensions over the past two years, which has placed pressure on the pension budget (in the first half of 2026, its execution exceeded the proportional level, reaching 55%). Therefore, GDP growth is, to a significant extent, although not entirely, induced by budget spending that prevents sufficient fiscal consolidation.
👷 Unemployment remained unchanged at 11.3% in the second quarter of 2026, accompanied by similar employment and unchanged labour force participation. Thus, the labour market remained in a state of intense lethargy, failing to respond to GDP growth. Informal employment increased further, from an already high 13.3% of total employment to 14.3%, and may represent an important – although not the only – indication that the particularly high level of the grey economy – likely especially in construction – is not declining.
💶 In the second quarter of 2026, inflation increased to 4.6% year-on-year (from 3.7%), although this was mainly due to low-base effects stemming from a previous period during which measures limiting margins and prices were in force. Nevertheless, the persistence of conflicts on European soil and in the Middle East, together with domestic pressures on the budget deficit, calls for particular vigilance regarding price dynamics on the part of monetary and fiscal policy.
📊 Economic growth is expected to continue throughout 2026, driven mainly by domestic factors. Finance Think’s projection for GDP growth in 2026 is 3.5%, while inflation is projected at 4.1%.
