Real GDP is estimated to have grown by 0.6% in 2023, marginally below the Autumn 2023 Forecast, as private consumption moderated and investment slowed down considerably, due to rising financing costs and the phasing out of housing renovation tax credits. After decreasing by 0.3% in the second quarter, GDP edged up in the third and fourth quarters, providing a marginally positive carryover into 2024.
Economic output is forecast to continue growing slowly in 2024, with households’ purchasing power expected to benefit from disinflation and an increase in wages, against the background of a resilient labour market. Investment is set to recover, driven by government and RRF-funded infrastructure projects offsetting the drag from lower expenditure on housing construction. Annual GDP is projected to grow by 0.7% in real terms, slightly lower than expected in autumn.
Investment is expected to accelerate in 2025, as the implementation of RRF-backed projects gathers pace, boosting both infrastructure spending and the purchase of firms’ tangible and intangible assets, which is also anticipated to benefit from improving financial conditions. This surge in capital spending is set to translate into stronger growth of imports, above the mildly improving outlook for exports. Overall, real GDP is forecast to increase by 1.2% in 2025, unchanged compared to autumn.
HICP inflation decreased steadily last year from the 2022 peak, driven by rapidly falling energy prices gradually passing through to the other goods, but also by the limited increases in services inflation. In the fourth quarter of 2023 inflation fell back to 1% y-o-y and stayed below 1% in January. Moderate wage increases have so far helped to keep inflation in check. As the main collective labour contracts are being gradually renewed, workers are expected to recover the past losses of purchasing power. HICP inflation is projected at 2.0% in 2024 and at 2.3% in 2025 on the back of an expected pick-up in wages, led by the public sector. Compared to autumn, this is revised down for 2024 but remains unchanged for 2025.