Despite heightened uncertainty, slowing services consumption and inventory depletion, optimism for FY:2026 derives from strong fixed investment and exports – especially tourism – combined with fiscal flexibility
• Economic activity remained resilient in Q1:2026, despite early spillovers from the M. East crisis. GDP increased by 2.0% y-o-y (+0.2% q-o-q), with a softer outcome relative to the March NBG baseline, reflecting a sharp inventory drawdown and moderating residents’ services consumption.
• On a positive note, fixed capital investment remained the dominant growth driver for a 4th consecutive quarter. GFCF rose by 12.1% y-o-y, contributing 2.0 pps to annual GDP growth − exceeding 18.0% of GDP since mid-2025 (a 16-year high). GFCF expansion was broad-based, led by both non-residential and residential construction as well as by investment on ICT, machinery and transportation equipment.
• Underlying investment dynamics remain strong, supported by the large project pipeline, high capacity-utilization, supportive financing conditions, strong FDI inflows, and accelerating RRF-related capex.
• Also positive was that net exports have added 0.6 pps in Q1 GDP, as total exports growth (+2.4% y-o-y) exceeded imports (+0.5% y-o-y) with half of export growth attributed to tourism.
• In fact, tourism recorded exceptionally strong performance in Q1:2026, with receipts rising by 64.3% and arrivals by 38.3% y-o-y, showing no visible geopolitical impact through March, while goods exports increased by 2.8% y-o-y (constant prices), supported by stronger refined petroleum product exports.
• Private consumption growth eased to 0.7% y-o-y in Q1 – the slowest pace in five years – reflecting both adverse base effects and rising uncertainty, as consumer confidence declined to its lowest level since late 2022 and inflation expectations increased to 4-year highs.
• The consumption slowdown in Q1:2026 was concentrated in services − an estimated drop in services consumption by residents of c. 4.0% y-o-y in real terms, particularly in food, accommodation, and leisure categories − whereas retail sales volumes remained robust (+3.8% y-o-y). Consumers appear to be front-loading purchases of goods and engaging in stockpiling, while cutting back on discretionary services, consistent with elevated inflation expectations and declining confidence.
• Public sector activity gained traction, with government consumption increasing by 1.6% y-o-y and PIB & RRF related expenditure by 15.5% y-o-y, jointly contributing +0.6 pps to Q1 GDP growth.
• The continued inventory drawdown for a 4th consecutive quarter reduced GDP growth by 1.5 pps − marking the most pronounced depletion cycle since 2008 − reflecting robust demand for goods, intensified absorption of production inputs, and supply-chain frictions constraining the timely rebuilding of inventories, particularly in the energy sector.
• Available monthly indicators point to a temporary easing in activity in Q2:2026, with the NBG nowcasting model projecting a q-o-q contraction in GDP of -0.2% (implying a y-o-y growth of 1.4%), reflecting mainly weaker household sentiment, amid higher oil prices and rising inflation pressures, softer labour market conditions in April, and increased caution in the services sector. Assuming a partial easing of energy price pressures by Q3 and an improvement in sentiment, GDP growth should reach 1.7% y-o-y in FY:2026, edging close to 2.0% y-o-y in H2:2026.