Economic growth accelerated in Q1, driven by the export-oriented manufacturing sector
The improvement in the business climate within the industry had signalled a strengthening of activity. Industrial production growth reached 6.1% year-on-year in Q1, vs. 5.0% in Q4 2025, supported by a sharp rise in exports – particularly of electronic goods. This momentum contributed to a slight recovery in investment in Q1. Growth in services, meanwhile, slowed from 5.6% y/y in Q4 2025 to 5.0% in Q1 2026. The rebound in retail sales observed in January–February did not last, due in particular to the waning impact of government subsidy schemes. The consumer confidence index has been recovering slowly for several months, but remains very low. The contraction in property transactions and house prices continued.
Households are reducing their debt
Outstanding bank loans to households recorded an unprecedented decline in March (-0.5% y/y), in line with the contraction in house sales and low confidence. Growth in domestic credit to enterprises and the government continued to slow. The central bank is nevertheless expected to keep its key interest rates unchanged in the very short term.
The inflationary impact of the war in the Middle East was evident in March
CPI inflation reached 1% y/y, up from 0.8% in January-February, driven by rising energy prices, while core inflation slowed to 1.1% in March, down from 1.3% in January-February. The producer price index rose by 0.5% y/y, ending 41 consecutive months of decline.
