Macroeconomic Projections Report. June 2025
- The GDP growth outlook for 2025 has been revised downwards compared to forecasts published earlier. This is driven by the adverse effects of tariffs imposed by the US and elevated uncertainty surrounding geopolitical tensions and trade policy. This uncertainty keeps economic agents cautious and was already partially reflected in short-term data in the first quarter of the year. The implementation of major investment projects, increased defence spending, as well as diminished uncertainty in trade policy are expected to bolster economic activity in 2026–2027. This enables the GDP growth forecast for that period to remain aligned closely with prior estimates – the slight decline is related to the weak investment activity so far, which will reduce the ability of entrepreneurs to rebound in the context of demand recovery, as well as to competitiveness challenges.
- The inflation forecast has been revised upwards for the entire projection horizon. This was mainly driven by the incoming inflation data, which show a sharper-than-anticipated rise in food prices. Services prices also continue their increase, and their impact on inflation will remain significant throughout the projection horizon. Meanwhile, the increase in energy prices was temporary and, amid high global uncertainty, futures prices are lower than previously. This is a disinflationary factor.
- Slower economic growth is also reflected in the labour market, with the unemployment forecast revised slightly upwards for the entire projection horizon. However, the unemployment rate is expected to remain below 7%. Labour supply rises as formerly economically inactive persons begin seeking employment. As the economy resumes faster growth, a higher availability of labour resources will ease the upward pressure on wages. However, wage growth will remain resilient at around 6% over the medium term, as the impact of demographic changes on labour supply will still be negative.
- The budget deficit is projected at roughly 3% of GDP, and this assessment has not changed significantly. It includes an increase in defence funding, in line with the government's commitment to reach 5% of GDP by 2028. Borrowing needs are expected to remain high due to increasing budgetary expenditures, with the government debt level approaching 50% of GDP over the medium term.
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