Headline inflation has been on an upward trend in recent months but will moderate over the medium term as transitory pressures subside.
Impacted by necessary fiscal consolidation and renewed global trade headwinds, real GDP growth is projected to remain weak in 2025. The main downside risk to the outlook stems from a deviation from the agreed fiscal consolidation path. In the short term, higher taxes and electricity price liberalization will weigh on consumption. However, the alternative, delaying consolidation, would have undermined market confidence, EU and private investment, and could have led to even weaker growth. Over the medium term, fiscal adjustment will strengthen confidence, lower financing costs, and create fiscal space for productivity-enhancing spending on innovation, infrastructure, and skills. Efficiency gains from tax reforms, combined with structural reforms, will further support competitiveness.
Poverty reduction is expected to slow through 2025 and into the medium term, as weak growth, fiscal tightening, and inflationary pressures pose risks to household welfare, particularly for low-income and energy-poor groups.