GDP increased by 2.2% y-o-y in Q1:2025, remaining flat in q-o-q terms, in comparison with 2.5% (+0.8 q-o-q,) in Q4:2024 and 2.3% y-o-y in FY:2024.
Private consumption remained the primary catalyst of growth, rising by an average annual pace of 1.9% y-o-y and contributing 1.3 pps to annual GDP growth in Q1:2025. The key driver was strong labor market conditions, reflected in the average increase in labor compensation by 6.4% y-o-y, the steady drop in unemployment rate (to 8.8% in Q1:2025), and solid consumer credit growth (+5.6% y-o-y in March 2025).
Inventories continued to play a significant role in GDP dynamics, contributing 1.6 pps in y-o-y GDP change in Q1:2025, from 3 pps in 2024. This is partly explained by strong demand conditions, a shorter inventory cycle for enterprises, and preemptive stockpiling ahead of potential tariff increases.
The main surprise in the Q1 accounts was the fact that gross fixed capital formation (GFCF) declined markedly by 3.2% y-o-y (-6.1% q-o-q s.a.) − experiencing the largest drop since the 1st Covid-19 lockdown in 2020 – mostly due to construction (both residential and non-residential), with this decline contrasting with the most recent leading indicators for these sectors.
Part of the GFCF weakness could be attributed to transitory factors, such as:
- Large investment projects, which are often included in inventories during their construction phase and then are re-classified in future data revisions, mainly to fixed investment.
- Lower-than-planned expenditure through PIB & RRF in Q1:2025 (0.7% of GDP in Q1:2025 vs 1.2% in Q1:2024), which is expected to be offset by higher payments during the remainder of the year (5.2% of GDP for the period April-December 2025 from 4.4% in the same period in 2024).
However, there are some other factors with potentially more persistent negative effects on GFCF (mainly residential and non-residential construction activity). Some of the most important include:
- significant labor shortages,
- high construction costs (building material prices rose by 25%, cumulatively, from 2021), and
- high land values, which increased in tandem with surging residential and commercial real estate valuations (house prices up 78% since 2018, returning to pre-crisis highs).
More encouragingly, the NBG nowcasting model estimates, incorporating the latest information from leading and conjunctural indicators available for Q2:2025 − especially subcomponents of business surveys referring to demand prospects and production orders − point to accelerating GDP growth, in q-o-q terms, to +0.5% (with y-o-y growth slowing temporarily to 1.6% in this quarter due to unfavorable base effects).
However, the investment-led slowdown in Q1 is difficult to assess as to its transitoriness. FY:2025 growth will be supported by an expansionary fiscal and monetary policy − a fiscal impulse of 1-1.5% of GDP and a smaller but still positive credit impulse (0.2% of GDP). Moreover, services exports growth (shipping and tourism) is expected to pick up from Q2 onwards. On the other hand, the upward revision of the quarterly path of GDP in 2024 has weakened the positive carryover effect on 2025 growth by 0.25 pps compared with our previous estimate of 2.5%.