Real GDP rose 2% in the first quarter. Investment surged by 12.1%. Inflation of 4.9% in May is putting pressure on purchasing power and dampening future domestic demand.
This is according to an analysis by Alpha Bank, in which the bank’s economists note that the domestic market significantly outperformed the European Union average, while growth stagnated at 0.7%. With the exception of Ireland and Romania, the rest of the European economies showed marginally positive changes.
Output in the three largest economies of the eurozone—Germany, France, and Italy—remained weak. Domestic activity showed resilience despite the volatile international environment. The escalation of geopolitical tensions in the Middle East caused a rise in international energy prices. This directly intensified inflationary pressures.
The Greek market demonstrated an increased ability to adapt to external shocks. The economic climate remained expansionary. This trend contrasts with the downward trajectory observed in the European Union since early 2026.
Investments
Investment was the main driver of the upturn. The first quarter closed with a double-digit growth rate of 12.1% on a year-over-year basis. This marks the third consecutive quarter of double-digit growth. This category contributed 2 percentage points to the annual change in GDP. All subcategories of investment recorded significant growth.
The implementation of the National Recovery and Resilience Plan and the Public Investment Budget are supporting economic activity. The Recovery Fund served as a catalyst for reversing the investment shortfall. Resources were directed toward high-priority sectors such as the green and digital transitions. The completion of the program presents the major challenge of establishing a new investment model.
On the production side, Gross Value Added increased by 1.8% year-over-year. The secondary sector contributed 1 percentage point. The tertiary sector added 0.8 percentage points. The primary sector made a zero contribution. Within the secondary sector, manufacturing contributed 0.7 percentage points and construction 0.3 percentage points. Value added in construction posted a double-digit growth rate of 13.4% year-over-year for the fourth consecutive quarter.
Consumption
The other components of demand performed less strongly. Private consumption rose by 0.7% and public consumption by 1.6% on a year-over-year basis. Their contribution to GDP growth was 0.5 and 0.3 percentage points, respectively. Private consumption is being driven by rising employment and strong tourism demand. However, it is showing clear signs of weakening. The 0.7% growth rate is the lowest in the past five years. This trend reflects consumers’ dwindling purchasing power due to rising prices.
Net exports added 0.6 percentage points to GDP. The growth rate of exports of goods and services exceeded that of imports. In the services sector, trade, hotels, restaurants, and transportation made a negative contribution of 0.3 percentage points. In contrast, the remaining service categories made a positive contribution of 1.1 percentage points. Inventories were the only component of demand with a negative contribution.
Risks
The main risk for the current year lies in price trends. Inflation gradually accelerated from 3.1% in February to 4.9% in May. This trend reflects higher fuel prices and energy pressures. Higher prices are directly affecting purchasing power and short-term demand. Growth momentum is expected to moderate in the coming quarters. Domestic demand will slow, while tourism will level off.
The annual growth rate for the current year is estimated not to fall below 1.8%. This forecast is subject to certain conditions. The framework agreement between the U.S. and Iran must be upheld. This will allow for the gradual restoration of normal functioning in international energy markets.
The trend of the economic climate index confirms this stabilization. From September 2021 to May 2026, the index has been moving in the upper section of the graph, between the phases of slowdown and expansion. In contrast, in the European Union, the index is in the lower-left quartile. Since early 2026, it has been on a downward trajectory below its long-term average.