Autumn Forecast

Economic growth is projected to be considerably higher this year (3.8%) than last year (1.5%), with the broad-based strengthening of economic activity also significantly exceeding our spring forecast (2.0%). The acceleration, particularly pronounced in the first half of the year, reflects several factors: a strong recovery in exports, further supported by the launch of new production capacities in the pharmaceutical and automotive industries; the completion of major investment projects; and continued growth in household disposable income and consumption. The broad-based strengthening of economic activity points to the resilience and adaptability of the economy amid heightened economic and geopolitical uncertainty in the international environment. However, some growth drivers are one-off, particularly the acceleration in investment in the year of local elections and the completion of major investment projects (the RRP and the second railway track project), with their contribution to growth gradually fading. In addition to strong investment activity, domestic demand is being supported this year by private consumption, underpinned by high employment, faster wage growth and improved consumer confidence. Government consumption will also increase, mainly owing to the full implementation of the long-term care system and higher employment in health and social work. Total exports, which largely stagnated last year, will increase significantly this year. Growth is broad-based, supported by stronger export performance and the launch of new production capacities in the domestic pharmaceutical and automotive industries. As the effects of one-off factors gradually fade, economic growth is expected to moderate to 2.5% in 2027 and 2.3% in 2028. Employment is expected to be slightly higher this year than last year and to remain broadly stable at a high level over the next two years amid limited labour supply, while unemployment will remain low. Wage growth will strengthen this year, followed by a gradual moderation. Inflation is expected to average 3.1%, exceeding the spring forecast (2.6%), mainly due to higher energy and services prices, while food price growth is also expected to increase again towards the end of the year. Over the next two years, inflation will gradually moderate, assuming no new external shocks. The forecast is subject to significant, predominantly downside risks, stemming mainly from the international environment, related to the further course of the war in the Middle East and developments in global energy markets. Trade tensions and developments in financial markets remain important sources of uncertainty, while additional risks stem from potentially more pronounced impacts of climate change and larger corrections in the value of AI-related investments. In the domestic economic environment, risks are mainly related to more severe labour shortages, which could further intensify labour cost pressures and weaken firms’ competitiveness. There are, however, also some upside risks to economic growth.