Q2 GDP growth revised upwards

Economy shifts into a higher gear: According to a second release, GDP growth edged up to 3.4% in Q2 from 3.3% in the first quarter, marking an over two-year high. Q2’s figure was revised upwards from the preliminary estimate of a 3.1% rise. On a seasonally adjusted quarter-on-quarter basis, economic growth gathered momentum, picking up to 0.9% in Q2, from the previous quarter's 0.7% expansion.

Public spending and fixed investment fuel acceleration: Domestically, public spending rose 14.4% in Q2 (Q1: +8.8% yoy), and fixed investment growth accelerated to 10.1% in Q2 from Q1’s 8.8%, spearheading the improvement in annual GDP growth. Meanwhile, private consumption increased 6.8% in the second quarter, which was below the first quarter's 7.2% expansion. On the external front, exports of goods and services fell 4.8% year on year in the second quarter, a sharper drop than the first quarter's 3.3% contraction. In addition, imports of goods and services growth moderated to 0.1% in Q2 (Q1: +4.6% yoy), marking the worst reading since Q1 2024.

Economy to remain resilient by historical standards in 2025: GDP growth should echo its prior 10-year average in 2025 and remain close to 2024’s level. Domestic demand will provide tailwinds as interest rates ease and investor sentiment strengthens thanks to an improving political climate, Schengen membership, EU funds and an expected euro adoption. These factors should buttress public and private spending plus fixed investment, partly offsetting a protracted export slump.

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