4Q25 GDP increased 2.0% y/y, where domestic demand remained the growth pillar, while less favorable external trade contribution weighed on the overall performance. On a full year scale, GDP expanded 1.1% in 2025, showing strongest support from rebounded investments and solid private consumption pace. As far as 2026 is concerned, domestic demand is expected to remain the key growth engine, while challenges regarding external demand developments should continue to weigh on the export outlook, thus diminishing the net export contribution. Following more moderate 1% alike growth in 2025, we see GDP accelerating towards 2% mark in 2026, with risks remaining linked to challenging geopolitical environment.
After averaging 2.4% in 2025, inflation entered 2026 on a similar footing, with January landing at 2.6% y/y and February rising to 2.9% y/y, mainly driven by services and energy, with the latter also reflecting a one-off base effect in electricity prices. Looking ahead, persistent service pressures should remain supported by steady wage and labor market trends, while heightened geopolitical tensions in the Middle East have increased volatility in global energy markets, posing an upside risk to the short-term inflation trajectory. The fiscal deficit is expected to widen to around 2.5% of GDP in 2025, mainly reflecting the slowdown in economic growth and the effects of the public sector wage reform. While 2026-2027 budget targets suggest more accommodative fiscal stance and gap closer to the 3% mark, fiscal risks are expected to remain largely contained.