COMMISSION STAFF WORKING DOCUMENT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE Alert Mechanism Report 2026 prepared in accordance with Article 3 of Regulation (EU) No 1176/2011 on the prevention and correction of macroeconomic imbalances
Date: 2025-11-25
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: economic disparity, economic growth, economic recovery, economic statistics, euro area, inflation, macroeconomics, multilateral surveillance, national accounts, public debt

EN 

  EN 

   EUROPEAN COMMISSION  Strasbourg, 25.11.2025  SWD(2025) 956 final  COMMISSION STAFF WORKING DOCUMENT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE Alert Mechanism Report 2026       prepared in accordance with Article 3 of Regulation (EU) No 1176/2011 on the prevention and correction of macroeconomic imbalances       {COM(2025) 956 final} - {SWD(2025) 900 final}  
 
 
CONTENTS 

1. 

2. 

Introduction 

Imbalances, risks and adjustment: main developments 
2.1. External sector 
2.2. Competitiveness 
2.3. Housing markets 
2.4. Household debt and saving 
2.5. Non-financial corporations 
2.6. Government sector 
2.7. Financial sector 

3. 

Country sections 

Belgium 

Bulgaria 

Czechia 

Denmark 

Germany 

Estonia 

Ireland 

Greece 

Spain 

France 

Croatia 

Italy 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Hungary 

Malta 

The Netherlands 

Austria 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Finland 

Sweden 

Euro Area 

Annex 1. Notes to the tables of the Country sections 

Annex 2. MIP scoreboard 

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18 
22 
25 

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31 
34 
37 
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43 
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55 
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79 
82 
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97 
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109 

112 

113 

 
 
 
LIST OF GRAPHS 

2.1. 
2.2. 
2.3. 
2.4. 
2.5. 
2.6. 
2.7. 
2.8. 
2.9. 
2.10. 
2.11. 
2.12. 
2.13. 
2.14. 
2.15. 
2.16. 
2.17. 
2.18. 
2.19. 
2.20. 
2.21. 
2.22. 
2.23. 
2.24. 
2.25. 

Change in current account balances vs net international investment position 
Current account and net international investment position 
Selected graphs for the external sector 
Inflation and unemployment dynamics 
Nominal and real effective exchange rates 
Selected graphs for competitiveness 
House price evolution and House price change and household debt in 2024 vs over/undervaluation in 2023 
House price change vs borrowing capacity change, from 2021 to 2023 and from 2023 to 2024 
Building permits for residential construction, 2013 to 2024 
Selected graphs on the housing market 
Household debt-to-GDP ratios 
Decomposition of changes in household debt-to-GDP ratios 
Net credit flows to households 
Selected graphs on household savings and debt 
Non-financial corporate debt-to-GDP ratios 
Credit growth of non-financial corporations 
Corporate interest coverage ratio and costs of borrowing 
NFC profit indicators 
Selected graphs on non-financial corporations 
Government balances across the EU 
Government debt across the EU 
Drivers of the evolution of the gov’t debt-to-GDP ratios: post-pandemic and now 
Selected graphs on the government sector 
Banking sector: profitability, capital ratios and non-performing loans 
Selected graphs on the financial sector 

3 
4 
5 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
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18 
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1. INTRODUCTION 

This  staff  working  document  provides  the  underlying  technical  analysis  as  part  of  the 
Alert Mechanism Report. The present staff working document provides background information 
and  accompanies  the  Commission  Communication,  which  highlights  the  main  concerns  at  the 
current  juncture  and  identifies  Member  States  for  which  in-depth  reviews  (IDRs)  should  be 
undertaken  to  assess  whether  they  are  affected  by  imbalances  (Article  5  of  Regulation  (EU) 
No 1176/2011)  (1).  The  present  staff  working  document  provides  the  economic  reading  of  the 
scoreboard  (2).  The  analysis  contained  in  the  present  staff  working  document  also  builds  on 
analytical  tools  and  assessment  frameworks,  additional  published  data,  notably  in-year  data  for 
2025, and forecasts, largely based  on the Commission autumn 2025 economic forecast (3)°(4). In 
comparison  with  previous  editions  of  this  staff  working  document,  part  of  the  cross-country 
considerations  around  risks  of  imbalances  was  streamlined  considering  the  content  of  the  new 
European  Macroeconomic  Report,  which  conveys  a  narrative  around  risks  to  the  macro-financial 
stability of the EU economy (5).  

Taking into account discussions on the AMR within the Council, the Commission will then 
prepare In-Depth Reviews for the Member States that may be affected by, or may be at 
risk  of  being  affected  by,  imbalances.  The  In-Depth  Reviews  will  be  published  in  early  2026 
and  will  provide  the  basis  for  the  Commission  assessment  of  the  existence  and  severity  of 
macroeconomic imbalances, and for the identification of policy gaps. The eventual conclusions on 
the existence of imbalances and their severity are planned to be published with the spring package 
of the European Semester. 

(1)  Commission communication, Alert Mechanism Report 2026, COM(2025) 956. 

(2)  This  staff  working  document  with  the  economic  reading  of  the  scoreboard  is  accompanied  by  another  staff  working 
document that contains the values of the scoreboard: Commission staff working document, Statistical Annex accompanying 
the Alert Mechanism Report 2026, SWD(2025) 900. 

(3)  The cut-off date for the scoreboard data, i.e. the date on which data were extracted from the Eurostat database for the 

preparation of this report, was 31 October 2025. For any other data, the cut-off date was also 31 October 2025. 

(4)  European Commission, European Economic Forecast, Autumn 2025, Institutional Paper 327, November 2025. 

(5)  2026 European Macroeconomic Report, SWD(2025) 957. 

1 

 
 
 
 
 
2. IMBALANCES, RISKS AND ADJUSTMENT: MAIN 
DEVELOPMENTS 

2.1.  EXTERNAL SECTOR 

• 

In 2024, the 3-year averages of the current account balances of four Member States were 
below  the  lower  scoreboard  threshold  of  -4%  of  GDP:  Greece,  Cyprus,  Romania  and 
Slovakia. Three other Member States had averages above the upper threshold of 6% of 
GDP: Denmark, Ireland, and the Netherlands. As for the NIIP readings, they were below 
the  scoreboard  threshold  of  -35%  of  GDP  for  seven  Member  States:  Ireland,  Greece, 
Spain, Cyprus, Portugal, Romania, and Slovakia. 

•  Between 2023 and 2024, the current account balances increased in around half of the 
Member  States  (Graph    2.3.b).  Ireland  recorded  the  strongest  increase  (9.1  pps.),  while 
Luxembourg,  Croatia,  Slovakia,  Poland  and  Romania  faced  declines  of  more  than  1 pp.  in 
their  current  account  balances.  The  largest  current  account  surpluses  were  recorded  in 
Ireland  (6)  (16.2%  of  GDP),  Denmark  (12.2%),  and  the  Netherlands  (9.1%),  while  Greece 
(-7.2%),  Romania  (-8.2%)  and  Cyprus  (-8.2%)  continued  to  record  the  highest  current 
account deficits (Graph 2.3.a) (7). Balances in around half of the Member States remained 
below  the  pre-pandemic  level,  with  deficits  in  Greece,  Romania  and  Cyprus  being  the 
furthest  below.  The  current  account  balances  of  most  Member  States  remained  below 
levels suggested by fundamentals in 2024 (Graph 2.2.a). 

•  Current account balances are generally forecast to remain stable across countries. In-year 
2025 data, however, suggest that the EU aggregate current account balance will somewhat 
decline compared to 2024 levels, and the current account balance is set to remain broadly 
stable in most countries, with some exceptions. These are, in particular, Ireland, Latvia on 
the worsening side and Greece on the strengthening side. 

•  From  a  saving-investment  perspective,  the  net  lending/borrowing  positions  were  driven 
mainly by persistently high savings of the private sector in most Member States in 2024. 
Surpluses  were  driven  by  the  corporate  sector  savings  in  Ireland,  Denmark,  and  the 

(6)  In  the  case  of  Ireland,  the  current  account  balance  improved  due  to  a  strong  surplus  in  goods  and  a  significant  rise  in 
service  exports,  including  a  substantial  one-off  export  of  intellectual  property  from  the  MNE  sector,  see  International 
Monetary  Fund.  European  Dept.  "Ireland:  2025  Article IV  Consultation-Press Release;  Staff  Report;  and  Statement  by  the 
Executive Director for Ireland", IMF Staff Country Reports 2025, 128 (2025), https://doi.org/10.5089/9798229012768.002  

(7)  The  current  account  balances  of  Ireland,  Denmark,  the  Netherlands  and  Cyprus  also  somewhat  reflect  noticeable 

movements due to the presence of multinational enterprises (MNEs) and/ or special purpose entities (SPEs). 

2 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISEBEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISECountries with current account balance (3 year average, in % of GDP) above 6% or below -4% in 2024 in blueCountries with NIIP in % of GDP  below -35% in 2024 in blue 
 
 
 
2. Imbalances, risks and adjustment: main developments 

Netherlands,  while  in  most  other  Member  States,  households  contributed  more  strongly 
(Graph 2.3.c). The household net lending position strengthened in most Member States and 
EU  funds  also  contributed  to  the increase  of  the  net  external  position  in  several  Member 
States.  In  Cyprus,  Greece  and  Romania,  however,  households  contributed  greatly  to  the 
deficits, along with the government in the case of Romania and corporations in the case of 
Cyprus.  

• 

In 2024, the net international investment position (NIIP) strongly increased in almost 
all  Member  States,  mainly  due  to  valuation  effects  in  equity  and  bond  holdings,  with 
positive current account balances also contributing. The largest increases were recorded in 
Sweden  and  Denmark  (about  30  pps.),  and  in  Ireland  (about  20  pps.)  (Graph  2.3.f).  By 
contrast,  Croatia  (-2.8  pps.),  Malta  (-7.9  pps.)  and  Luxembourg  (-8.2  pps.)  recorded  the 
strongest NIIP declines. The current account balances of some net-debtor countries remain 
below the levels necessary for the correction of their strong negative NIIPs, as estimated by 
prudential  or  fundamental  benchmarks  (8).  In  most  net-creditor  countries,  NIIPs  remained 
considerably above levels explained by economic fundamentals, notably in Germany (Graph 
2.2.b). The NIIP-to-GDP ratios are projected to [decline or somewhat remain stable] in most 
member states in 2025.  

Graph 2.1: Change in current account balances vs net international investment position 

Source: Eurostat and European Commission calculations. 

(8)  The current account required to reach a specific NIIP target is the current account required to reach the prudential threshold 
over the next 10 years, or to halve the gap to the NIIP in line with fundamentals, whichever is higher, and is based on the 
European  Commission’s  Spring  Forecast.  NIIP  prudential  thresholds  are  determined  from  the  maximisation  of  the  signal 
power in predicting a balance of payment crisis, taking into account country-specific information summarised by per-capita 
income.  The  NIIP  in  line  with  fundamentals  (NIIP  norms)  are  obtained  as  the  cumulation  over  time  of  the  values  of  the 
current account norms. For the methodology for the computation of NIIP prudential and fundamental benchmarks, see A. 
Turrini  and  S.  Zeugner  (2019),  “Benchmarks  for  Net  International  Investment  Positions”,  European  Economy,  Discussion 
Paper 097/2019. 

3 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISE-4.0-2.00.02.04.06.08.010.0-150-100-50050100Change in current accounts 2024-2023, pp of GDPNIIP 2024, % of GDP     
 
 
Graph 2.2: Current account and net international investment position 

2. Imbalances, risks and adjustment: main developments 

Notes: Countries are ranked in increasing order of current account balances in 2024. CA stands for current account. 
NENDI is the NIIP excluding non-defaultable instruments. Current account norms: see footnote (9). For the concepts of 
NIIP norm, NIIP prudential threshold, and NIIP-stabilising current account benchmark and required CA for reaching specific 
NIIP target: see footnote (3). 
Source: Eurostat and European Commission calculations. 

(9)  Current accounts in line with fundamentals (current account norms) are derived from reduced-form regressions capturing 
the  main  determinants  of  the  saving-investment  balance,  including  fundamental  determinants,  policy  factors  and  global 
financial  conditions,  and  is  based  on  the  European  Commission’s  Spring  Forecast.  See  L.  Coutinho  et  al.  (2018), 
“Methodologies for the assessment of current account benchmarks”, European Economy, Discussion Paper 86/2018, for the 
description  of  the  methodology  for  the  computation  of  the  fundamentals-based  current  account  used  in  this  AMR;  the 
methodology is akin to S. Phillips et al. 2013), “The External Balance Assessment (EBA) Methodology”, IMF Working Paper, 
13/272. 

4 

-15-10-505101520IENLMTDESILUESLTPTATITFRBEFIEELVHRSKELCYDKSECZHUPLBGROEuro areaNon-euro area% of GDPa) Current accont balances and benchmarks CA balance, prepandemic averageCA balance 2024CA balance 2025, forecastCA required to reach benchmarksCA norm 2024Av. CA required to stabilize NIIP over next ten years-200-150-100-50050100150MTDENLBELUATFIITSILTEELVFRHRESIESKPTCYELDKSEBGCZPLHUROEuro areaNon-euro area% of GDPb) NIIPs and benchmarksNIIP 2019NIIP 2024NIIP 2025, forecastNENDI 2024NIIP norm2024Prudential NIIP 2024   
 
 
Graph 2.3: Selected graphs for the external sector 

2. Imbalances, risks and adjustment: main developments 

Source: Eurostat and European Commission calculations. 

5 

-10-50510151819202122232425in %e) Decomposition of domestic demand growth in EU27ΔC, constant pricesΔI, constant pricesΔC deflatorΔI deflatorΔC+I, constant pricesΔC+I, current prices-50-40-30-20-1001020304050IEDKNLMTSEDESILULTESPTCZHUATITPLFRBEFIEELVBGHRSKELROCY% of GDPa) Current account balances, 2024Services excl. travelTravel balanceEnergy balanceGoods excl. energyPrimary income balanceSecondary income balanceCurrent account balance-5-4-3-2-101234LVLTCZHUCYPTDKFRITMTESDEFISEEEATSINLELBEBGPLROSKHRLU% of GDPb) Decomposition of changes of the CA, from 2023-2024Services excl. travelTravel balanceEnergy balanceGoods excl. energyPrimary income balanceSecondary income balanceCurrent account balance-20-15-10-505101520IEDKNLMTSEDELTESSICZPTATHUITHRLUPLFIBEFRLVEESKBGCYROEL% of GDPc) Net lending/ borrowing by sector, 2024Households and NPISHCorporationsGovernmentTotal economy-8-6-4-20246810IECYCZLTLULVDKPTFRFIMTESBEHUDEITSEATNLSIEEPLELSKROHRBG% of GDPd) Decomposition of changes of the NLB, from 2023 to 2024Households and NPISHCorporationsGovernmentTotal economy-40-30-20-100102030405060DKSEIEPTFIDENLEEFRELCYESCZSIATITBELVLTHUPLSKBGROHRLUMTChange in pp. of GDP (y-o-y)f) Decomposition of changes of the NIIP,from 2023 to 2024Valuation changesNet transaction effect (rest FA bal.)Investment income effectNominal growth effect-20246810IE     
 
2.2.  COMPETITIVENESS 

2. Imbalances, risks and adjustment: main developments 

•  For  the  HICP-based  REER  (10),  the  three-year  changes  were  beyond  the  scoreboard 
thresholds  in  eight  Member  States:  Czechia,  Estonia,  Croatia,  Latvia,  Lithuania,  the 
Netherlands, Poland, and Slovakia.  

•  Nine  Member  States  exceeded  the  scoreboard  threshold  for  the  changes  in  export 
performance  against  advanced  economies  in  the  three  years  up  to  2024:  Belgium, 
Germany,  Estonia,  Luxembourg,  the  Netherlands,  Austria,  Slovakia,  Finland,  and 
Sweden.  

•  The  three-year  change  in  unit  labour  cost,  based  on  hours  worked,  was  above  the 
scoreboard  threshold  in  twenty-four  Member  States:  Belgium,  Bulgaria,  Czechia, 
Germany,  Estonia,  Ireland,  Spain,  France,  Croatia,  Cyprus,  Latvia,  Lithuania, 
Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Romania, 
Slovenia, Slovakia, Finland, and Sweden. 

• 

In 2024, headline inflation approached the 2% target in the euro area but remained high 
in some non-euro area countries, such as Romania, Hungary and Poland. Over 2025-2026, 
headline inflation  is expected  to  remain  higher  than  the  euro  area  average in  several  EU 
countries,  particularly  in  Romania,  Hungary,  and  Slovakia,  and  to  remain  below  the  euro 
area  average  in  Cyprus,  France,  Ireland,  Denmark,  Sweden,  Finland,  and  Italy.  Cumulated 
price  and  cost  differentials  are  forecast  to  continue  to build  up  in  some  countries  (Graph 
2.4.a).  Although  of  relatively  smaller  magnitudes  than  those  seen  since  the  pandemic, 
inflation differentials thus compound previous increases.  

(10)  Unless otherwise specified, REER refers to HICP-based REER, 42 trading partners. 

6 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISEBEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISEBEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISECountries with HICP based real effective exchange rate against 42 trading partners (3 year % change) above/below +/- 3% (EA) and +/- 10% (non-EA) in 2024 in blueCountries with export performance against advanced economies (3 year % change) below -3% in 2024 in blueCountries with nominal unit labour cost index per hour worked (3 year % change) above 9% (EA) and 12% (non-EA) in 2024 in blue 
 
Graph 2.4: Inflation and unemployment dynamics 

2. Imbalances, risks and adjustment: main developments 

Notes: a) Positive values indicate inflation higher than in the euro area 
Source: Eurostat and European Commission forecasts and calculations. 

•  Strong falls in unemployment were recorded in countries with high unemployment rates in 
recent  years,  such  as  Greece,  Spain,  and  Italy,  but  unemployment  rates  have  started  to 
increase somewhat in some countries. In Finland and Estonia, it has increased by more than 
1 pp. by the end of the third quarter of 2025.  

•  Nominal compensation per employee continued to rise strongly in 2024 and is expected 
to slow down in 2025 and 2026 overall. For 2024, internal EU dynamics have been again 
very  divergent,  with  increases  of  less  than  2%  in  Finland,  less  than  4%  in  Cyprus, 
Luxembourg, Italy, France, and Belgium, and more than 10% in Hungary, Poland, Bulgaria, 
Latvia, and Romania (Graph 2.6.b). The 2024 real wages (11) at EU level almost closed the 
gap with their 2019 level, but remained visibly below in Czechia, Italy, France, and Greece 
while  having  increased  by  double  digits  in  Bulgaria,  Romania,  Hungary,  Poland,  Latvia, 
Croatia, Portugal, Slovenia, and Cyprus. 

•  For  2024,  unit  labour  costs  (ULCs)  growth  remained  high,  and  the  3-year  change  was 
double digits in many Member States reflecting legacy from the high inflationary periods of 
2022, 2023, and, to a lesser extent, 2024. ULCs increased by close to 5% in both the EU 
and  the  EA,  ranging  from  little  change  in  Finland,  to  increases  of  over  10%  in  Romania, 
Bulgaria, Croatia, and Hungary (Graph 2.6.c). Most of the ULCs increase was driven by real 
compensation  increases.  In  only  a  few  cases,  such  as  Malta,  Cyprus,  Slovakia,  Denmark, 
Poland, and Bulgaria, productivity gains visibly subtracted from the ULCs growth. For 2025, 
ULCs are expected to grow at a more moderate pace across the EU, with a few exceptions 
(Romania,  Hungary,  Croatia,  Slovenia,  and  Bulgaria),  where  annual  growth  rates  are 
forecast to be above 6%. 

(11)  Nominal compensation per employee deflated by HICP. 

7 

-2-1012345678LVEEHRSKLTSINLATLUPTDEELMTESBEIEITCYFRFIROHUBGPLCZSEDKEANon-EAPps.a) Cumulated inflation differential vs. EA, 2024-2026GDP defl.Headline HICPCore HICP02468101214CZPLDEMTNLSIHUBGIEATDKLUROBECYSKHREUPTEEEALTLVFRITFISEELES% of population in labour forceb) Unemployment rate across the EU2025-095y avg.  
 
Graph 2.5: Nominal and real effective exchange rates 

2. Imbalances, risks and adjustment: main developments 

Source: European Commission. 

• 

• 

The EU’s nominal effective exchange rates (NEERs) appreciated in 2024, (Graph 2.5.a), 
and although they were partly offset by inflation differentials with trading partners, overall 
real effective exchange rates (REER) still appreciated. The strongest REER appreciation 
(Graph  2.5.b)  in  2024  was  in  Poland,  where  it  gained  7%  due  to  a  strong  zloty,  while 
nominal  depreciations  supported  REER  losses  of  4.4%  and  2.3%  in  Czechia  and  Hungary 
respectively.  In  Romania,  both  inflation  differentials  and  NEER  gains  pushed  the  REER  to 
appreciate by almost 3%. Within the  EA, 2024 saw appreciations in Belgium, Estonia, and 
Croatia (of around 1.5-2%) and depreciations in Lithuania, Latvia and Italy (around 1-1.5%). 
As of mid-2025, REERs have been marked by an appreciating trend. 

In  the  three  years  to  2024,  the  export  market  shares  against  advanced  economies 
fell  by  2.5%  and  3.3%  for  the  EU  and  the  EA  respectively.  The  largest  losses  were  for 
Belgium, Germany, Luxembourg, and Finland, but there were strong gains for Malta, Spain, 
Croatia, and Portugal (Graph 2.6.e). The changes in 2024 point towards the continuation of 
the post-pandemic trend of  manufacturing-intensive  Member  States  losing  export  shares, 
while Member States exporting travel services gain export shares (Graph 2.6.f), assisted by 
favourable export deflator dynamics.  

8 

BGDKPLROSEEAEU-20-15-10-50510152025-20-100102030ULC REER % changeGDP delf. REER % changeb) Change in REERs, 2024-2021EANon-EAAgg.45°80901001101201301401213141516171819202122232425index, 2015=100a) EU NEER index  
Graph 2.6: Selected graphs for competitiveness 

2. Imbalances, risks and adjustment: main developments 

Source: Eurostat and European Commission forecasts and calculations. 

9 

012345678910CYFRPTELITFIDKLUSIEAMTPLBEIESEEUESDENLCZLTLVATBGHRHUSKEEROAnnual % changea) Headline and core inflation, 2025-10 or last data availableHeadlineCore0510152025FIFRBEITLUCYIEESDEELSINLEEMTLTATPTSKHRLVDKSECZPLHUBGROEAEUEANon-EAAgg.Annual % chageb) Nominal compensation per employee202320242025f2026f-15-10-505101520EELTLVSKHRNLATDEBEMTSICYESITFRPTELFILUIECZPLBGROHUDKSEEUEAEANon-EAAgg.Annual % changed) Change in HICP/CPI-based REER, 42 part. 2019-2024ΔNEERΔrel. HICPΔREER-6-3036912151821FICYBEFRESLUITIEMTSIELSKDELTPTNLEEATLVHRDKSECZPLHUBGROEAEUEANon-EAAgg.Annual % changec) ULC decomposition, 2024Productivity (neg. contrib.)Real compensationInflationULC-20-15-10-5051015202530BEDEFINLLVEEATELLTLUFRITSISKHRESPTIECYMTBGHUSEDKROPLCZEANon-EA3Y % changee) Export market shares against advanced economies202420252026fELESHRCYMTPT​​​DE​​​​​​​​​​CZ​​​​​-505101520-15-10-5051015Travel services balanceExport market share % changef) Export market shares, travel services balance and manufacturing share of gross value added, 2024Manufacturing share in GVA   
2.3.  HOUSING MARKETS 

2. Imbalances, risks and adjustment: main developments 

• 

In  2024,  house  prices increased  above  the  9%  scoreboard  threshold in  seven  Member  States: 
Bulgaria, Greece, Croatia, Lithuania, Hungary, Poland and Portugal.  

•  House prices increased in 2024 in almost all Member States, with some countries on a clear 
path of high growth for several years. Growth was close to the scoreboard threshold in Ireland, 
Spain and the Netherlands (Graph 2.7.a). Many of these countries experienced sustained growth 
with limited slowdown in 2023. Cumulatively, house prices rose by more than 20% over 2023-
24 in Bulgaria, Poland, Greece, Croatia, Hungary, Lithuania,  and by more than 15% in Portugal 
and  Slovenia.  Conversely,  prices  fell  in  Germany,  Luxembourg,  France,  Austria  and  Finland, 
continuing declines from 2023. Over 2023 and 2024, Luxembourg, Germany, Finland, Sweden, 
France, Austria and, marginally, Denmark saw cumulative drops, with total reductions above 9% 
for  Luxembourg,  Germany  and  Finland.  By  early  2025,  growth  resumed  broadly,  except  in 
Finland.  

Graph 2.7: House price evolution and House price change and household debt in 2024 vs 
over/undervaluation in 2023 

Notes: The bubbles size in panel b refer to household debt as % of household income in 2024. 
Source: Eurostat and European Commission calculations 

•  Price dynamics reflect valuation gaps. Countries that were near fair value or undervalued in 
2023, such as Bulgaria and Poland, saw the strongest growth (Graph 2.7.b). Exceptions include 
Portugal  and  Greece,  where  prices  continued  to  grow  strongly  despite  an  estimated 
overvaluation of over 20%, and to a lesser extent Czechia and the Netherlands. Declines were 
concentrated in highly overvalued markets such as Luxembourg (where prices were overvalued 
by 32%) and Austria (+23%), while Sweden (+23%) recorded only a marginal increase. Finland 
remains an outlier, with falling prices despite a 16% undervaluation.  

•  Housing  transactions  and  mortgage  credit  rebounded  in  most  countries.  Credit  growth 
accelerated  with  lower  interest  rates,  reaching  five-year  highs  in  Lithuania,  Portugal,  Latvia, 
Estonia, Croatia, Spain, Hungary, Netherlands, Cyprus and Ireland (Graph 2.10.c). Transactions – 
which  had  fallen  in  2022-2023  –  partially  recovered  in  2024  and  exceeded  their  10‑year 

10 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISECountries with nominal house price index growth (1 year % change) above 9% in 2024 in blue-10-50510152025BGPLHUHRLTPTELIEESNLSIMTEEROCZLVSKDKBEITCYSEATDEFIFRLUEUEAAnnual % change, YoYa) House price changes2022202320242025-Q2BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISE-10-50510152025-30-1501530House price % change, 2024Over/undervaluation (%), 2023b) House price change vs over/undervaluation  
          
2. Imbalances, risks and adjustment: main developments 

average in Cyprus, Bulgaria, Spain, Portugal, Ireland, and Poland, markets with continued house 
price  growth.  Conversely,  transactions  remained  well  below  historical  averages  in  Austria, 
France, Luxembourg, Finland, and Slovenia where prices have been muted, but also in Hungary 
despite rising prices. 

•  Borrowing capacity surged in 2024, often outpacing nominal house price growth. After a 14% 
drop  between  2021-2023,  borrowing  capacity  rose  sharply  in  2024  –  by  over  10%  in  many 
countries, and up to 40% in Hungary, 30% in Romania, and around 20% in Poland and Bulgaria. 
Gains  were  modest  in  Belgium,  Germany  and  France.  Despite  this,  affordability  remains 
constrained, with mortgage-to-income ratios elevated. 

Graph 2.8: House price change vs borrowing capacity change, from 2021 to 2023 and from 2023 
to 2024 

Notes: (1) Borrowing capacity reflects the evolution of house prices that credit constrained households can afford by 
devoting a constant share of their income to mortgage payment at the origination of the mortgage. (2) Data used for 
computing borrowing capacity is median household income, interest rates and country-specific loan maturity. For loan 
maturity is used the average of maximum maturity, available in Grünberger et al. (2023): Housing taxation database 
1995-2021, European Commission, Joint Research Centre (JRC). The LTV ratio considered is 100% and other variables, 
like taxation, tax relief and transaction costs were fixed to zero to capture only the impact of income and interest rates on 
borrowing capacity. (3) The straight line serves as a reference where both variables — borrowing capacity and house 
prices — change by the same amount. (4) For more detailed methodology see Andrle, M. and M. Plašil (2019): Assessing 
House Prices with Prudential and Valuation Measures. IMF Working Paper No. 19/59. 
Source: Eurostat, ECB, JRC and European Commission forecasts and calculations.  
Source:  

•  Supply  constraints  remain  tight  and  building  permits  in  2024  were  low  relative  to  the  past 
decade (Graph 2.9), in most countries, especially Germany, France, Sweden and Finland. Building 
permits are at their highest levels in Portugal, Croatia, Latvia, Spain and Greece compared to the 
last  decade  but  are  still  low  as  the  last  decade  was  marked  by  historically  low  construction 
activity. Supply constraints are likely to keep upward pressure on prices through 2025-2026. 

11 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFI-10010203040-50-25025House price % change from 2021 to 2023Borrowing capacity % change from 2021 to 2023a) 2021 to 2023BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISE-1001020-1001020304050House price % change from 2023 to 2024Borrowing capacity % change from 2023 to 2024b) 2023 to 2024          
Graph 2.9: Building permits for residential construction, 2013 to 2024 

2. Imbalances, risks and adjustment: main developments 

Source: Eurostat and European Commission calculations 

12 

050010001500200025003000350040004500MTCYIESqm per thousand persons05001000150020002500LUBGPTPLBEHRNLROLTATSIDKLVFREEESELCZSEFISKDEHUITRange from 2013 to 20242024          
 
Graph 2.10: Selected graphs on the housing market 

2. Imbalances, risks and adjustment: main developments 

Notes: (1) Graphs a, b and c are ordered by decreasing order of the last data. (2) In Graph d, countries are ordered by 
decreasing order of 2023-Q4 values, as 2024 and 2025 data is not available for several countries. (3) In Graph f, 
countries are ordered by decreasing order of share of population that is "owner occupied with loan". 
Source: Eurostat, ECB and European Commission calculations. 

13 

60708090100110120130140150160PTLUATCZEEIEDKDEELNLSEHUSILVLTSKBEHRESFRMTPLITCYFIBGRO2010 = 100a) House-price-to-income ratio202320242025-Q20%25%50%75%100%NLSEDKBELUFIIEPTFRESSKEEDEATCZCYMTLTSILVITHUPLELHRBGROEA20EU27% of populationf) Distribution of population by tenure status, 2024Owner occupied, with loanOwner occupied, no loansTenant - market priceTenant - reduced price or free-50510020406081012141618202225Pps.e) Euro are house price change and country contributionsOthersNLITFRESDEEA200.02.55.07.510.0PLHUROCZLVEELTDKSKDEELIELUATNLCYITBESEFRPTHRSIFIESBGMT%b) Interest rate for house purchase (annual average)202320242025-Q35 years min.050100150200250LTPTLVEEHRCZSIESHUNLCYIEMTITBEDELUSKFIATFR2019 = 100c) New credit for house purchase by households, excluding renegotiations (12m average)2023-122024-122025-095 years max.406080100120140160180CYPLBGIEESITMTPTDKBELVFRLTSENLSIFICZATHULUlast 10y average = 100d) House transactions (4q average)2023-Q42024-Q42025-Q2          
2.4.  HOUSEHOLD DEBT AND SAVING 

2. Imbalances, risks and adjustment: main developments 

• 

In 2024, the household debt-to-GDP ratios of eight Member States were above the scoreboard 
threshold  of  55%:  Belgium,  Denmark,  France,  Cyprus,  Luxembourg,  the  Netherlands, 
Finland,  and  Sweden.  Bulgaria  was  the  only  Member  State  which  displayed  credit  growth 
above the scoreboard threshold of 14% of the previous year’s debt stock.  

•  Compared to 2023, the debt-to-GDP ratios declined in the majority of countries (Graphs 2.11 
and  2.14.e),  with  particularly  large  drops  in  very  high-debt  countries  such  as  Cyprus,  the 
Netherlands and Denmark. Bulgaria and Estonia are the only EU Member States where the 2024 
debt  ratio  stood  above  its  2019  level.  The  Netherlands,  Denmark,  and  Sweden  continued  to 
record  the  highest  debt-to-GDP  ratios,  joined  by  Luxembourg  when  considering  the  debt-to-
gross household disposable income ratio. In 11 Member States, debt ratios remain above their 
prudential benchmark (12). In less than half of the Member States, debt ratios are well explained 
by economic fundamentals.  

Graph 2.11: Household debt-to-GDP ratios 

Notes: Debt comprises loans (F4) and debt securities (F3), consolidated. 2025 figures present projections based on 
available in-year data and forecasts. 
Source: Eurostat and European Commission forecasts and calculations 

(12)  Fundamental benchmarks are derived from regressions capturing the main determinants of credit growth and taking into 
account a given initial stock of debt. Prudential thresholds identify a threshold above which banking crises become more 
likely. The fundamentals-based and the prudential benchmarks are calculated following Bricongne, J. C., Coutinho, L., Turrini, 
A., Zeugner, S. (2020), “Is Private Debt Excessive?”, Open Economies Review 31:471-512. 

14 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISEBEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISECountries with consolidated household (+NPISH) credit flow (in % of debt stock in t-1) above 14% in 2024 in blueCountries with consolidated household (+NPISH) debt (in % of GDP) above 55% in 2024 in blue020406080100120140NLDKSEFILUFRCYBEPTDEMTESSKATELEEITCZHRBGSIIEPLLTLVHUROEUEA% of GDP2019202320242025fFundamentals benchmark 2024Prudential benchmark 2024MIP threshold 
             
 
 
Graph 2.12: Decomposition of changes in household debt-to-GDP ratios 

2. Imbalances, risks and adjustment: main developments 

Notes: Debt comprises loans (F4) and debt securities (F3), consolidated. 2025 figures present projections based on 
available in-year data and forecasts. 
Source: Eurostat and European Commission forecasts and calculations 

•  Household deleveraging is forecast to slow down further and to start reversing in a broader set 
of  countries  in  2025.  The largest  increases  in the  debt-to-GDP  ratio in  2025 are  expected  for 
Bulgaria, Croatia, Estonia, Lithuania, and Portugal, all countries with low to moderate debt ratios. 
Deleveraging is expected to continue at a swift pace in Ireland, Greece, Cyprus, and Austria. 

•  The  deceleration  of  the  decline  in  household  debt-to-GDP  ratios  is  driven  by  the  slowdown  in 
nominal  GDP  growth  and  the  gradual  recovery  of  credit  flows  after  a  strong  contraction  in 
2023 (Graph 2.12 and Graph 2.13). Household borrowing behaviour remained muted in several 
countries,  including  Germany,  France,  and  Italy  in  2024;  while  it  recovered  dynamically  in 
Portugal,  the  Netherlands,  and  several  low-  to  moderate-debt  countries.  Credit  growth  was 
particularly  strong  in  Bulgaria,  Croatia,  Romania,  Lithuania  and  Hungary.  Net  credit  flows  in 
Bulgaria exceeded 21% of the previous year’s debt stock in 2024, resulting in significant growth 
in the debt ratio from a low basis.  

•  Mortgage interest rates have now come down from their peak value in all countries for new 
loans, while remaining above their pre-2019 level. For some countries (such as Spain and Italy) 
the  cost  of  borrowing  has  decreased  more  significantly  than  for  other  countries  (such  as 
Germany),  where  it  remains  close  to  its  peak  (Graph  2.14.a).  The  interest  rate  on  outstanding 
loans  rose  more  slowly.  For  some  countries  with  mostly  fixed  mortgage  interest  rates  (Graph 
2.14.d), it continues to increase in 2025, putting upward pressure on interest payments (Graph 
2.14.c).  

•  Households’  overall  financial  situation  has  improved.  Real  disposable  household  income 
growth  exceeded  2%  in  2024.  Households’  gross  saving  rate  remained  above  its  long-term 
average in several countries, including Germany, France and Spain (Graph 2.14.b). At the same 
time,  gross  saving  rates  remained  negative  in  Greece  and  Romania.  In  Estonia,  Latvia  and 
Slovakia, saving rates dropped  strongly in 2022, and they remained  below their pre-pandemic 
levels in 2024.  

•  The  proportion  of  non-performing  loans  remained  stable  at  around  2%  of  total  household 
loans  for  the  euro  area  as  a  whole.  It  continued to  decline significantly  in Cyprus  and  Greece, 
countries  with  a  legacy  of  high  shares  of  non-performing  loans.  In  several  countries  with  low 
proportions  of  non-performing  loans  to  households,  minor  upticks  were  observed  in  2024. 

15 

-8-6-4-202468CYNLDKESFRSEELIEATPTLUMTDEPLITFISKBEROCZHUSIHRLTLVEEBGEAEUPps. of GDPa) 2024Net credit flowsReal GDP growthInflationOther changesDebt/GDP, change-8-6-4-202468IEELCYATLUESNLPLDKDEFIFRSEITBEMTROCZSILVHUSKPTLTEEHRBGEAEUPps. of GDPb) 2025fNet credit flowsReal GDP growthInflationOther changesDebt/GDP, change            
Moreover, in Belgium, Germany, France, and Sweden, a slow but consistent upward trend can be 
noted. 

Graph 2.13: Net credit flows to households 

2. Imbalances, risks and adjustment: main developments 

Notes: Credit flows reflect loans and debt securities to households (net flows, consolidated) as reported by ECB. 2025 
figures present projections based on available in-year data and forecasts 
Source: Eurostat and European Commission forecasts and calculations 

16 

-50510152025BGHRROLTHULVMTEESISKPTNLCZPLBECYIESEESLUDEDKITELFRFIATEUEAb) As a % of debt stock in year t-12019202320242025fMIP threshold-2-10123456BGMTNLHREELTPTSKSIHULVBEROSECYCZLUPLDKESIEDEITELFRATFIEUEAa) As a % of GDP2019202320242025f            
 
 
Graph 2.14: Selected graphs on household savings and debt 

2. Imbalances, risks and adjustment: main developments 

Notes: a) Cost of borrowing concerns new (+renegotiated) loans for house purchase by HH and NPISH. 
Source: ECB-MIR. b) The gross savings rate is measured as a proportion of HH (+NPISH) gross disposable 
income, adjusted for changes in net equity in pension funds reserves. Source: Eurostat. c) Net interest paid = 
interest paid – received. Source: ECB-QSA (D41G). d) Variable rate loans are defined as loans with an interest rate reset 
due within one year and reflect outstanding loans to households. Source: ECB-RAI. e) GDI is 
measured as adjusted gross household disposable income (B7G, GDHI adjusted for social transfers in kind). 
f) NPLs are defined as HH gross non-performing loans and advances, % of total gross loans and advances to 
households. Source: ECB-CBD2. 
Source: Eurostat and ECB. 

17 

-5051015202530DEMTFRATNLIESIBEESPTFILUITSKHRLTEECYLVELEACZHUSEDKPLEUEuro areaNon-euroarea% gross disposable incomeb) Gross saving rate, households2024Peak since 20192019024681012CYELESHRITPTLUFRATMTIESKSIFIDEBENLLTEELVEAPLROHUBGSECZEuro areaNon-euroarea% of total loans and advancesf) Share of households NPLs2025-Q12023-Q1024681012LVEEDELTIEELSKNLATBELUITCYHRFRPTSIFIESMTEAHUPLROCZDKSEBGEuro areaNon-euro areaAnnualized, weighted average, %a) Cost of borrowing, new loans to households2025-092021-06Peak since 2021-6-5-4-3-2-1012345MTCYFRITELATDEPTBESIHRESLTSKLUFIIENLLVEEEAHUROCZPLDKSEBGEUEuro areaNon-euro area% gross disposable incomec) Interest burden (% gross disposable income), householdsInterest paid 2024Interest received 2024Net interest income 2024Net interest income 2021020406080100120140160180NLLUFICYBEFRMTPTDEIESKESATEEELITHRSILTLVEADKSECZPLHUROEUEuro areaNon-euroarea% gross disposable incomee) Household debt-to-GDI ratio202420190102030405060708090100FIEELTLVCYMTELPTESIEHRATLUITSISKNLDEBEFREABGROSEPLDKHUCZEuro areaNon-euro area%d) Share of variable rate loans among outstanding loans to households2025-Q22011-Q2          
2.5.  NON-FINANCIAL CORPORATIONS 

2. Imbalances, risks and adjustment: main developments 

• 

In  2024,  the  non-financial  corporate  debt-to-GDP  ratios  of  eight  Member  States  were 
above  the  scoreboard  threshold  of  85%:  Belgium,  Denmark,  Ireland,  France,  Cyprus, 
Luxembourg,  the  Netherlands,  and  Sweden.  No  Member  State  showed  credit  growth 
above the scoreboard threshold of 13% of the previous year’s debt stock.  

•  Non-financial corporate (NFC) debt-to-GDP ratios continued to decline in 2024 and reached 
their lowest levels since 2006 (Graph 2.19.a). In one-third of the EU countries, debt ratios 
increased  in  2024,  yet  mostly  from  comparatively  low  levels,  apart  from  Luxembourg 
where  debt  increased  from  264%  to  272%  of  GDP  (13).  Corporate  debt-to-GDP  exceeded 
the  prudential  benchmark  in  Luxembourg,  Cyprus,  Sweden,  Denmark,  the  Netherlands, 
Belgium, France, Ireland, Finland, Portugal, Malta and Spain (Graph 2.15). In only about one-
quarter  of  the  EU  countries  can  debt  ratios  be  explained  by  economic  fundamentals.  In 
2024, the pace of deleveraging slowed compared with previous years (Graph 2.19.c) and in 
most  countries,  deleveraging  is  expected  to  cease  or  slow  further  as  inflation  remains 
contained and credit is expected to accelerate (Graph 2.19.d). 

Graph 2.15: Non-financial corporate debt-to-GDP ratios 

Notes: Debt comprises loans (F4) and debt securities (F3), consolidated. 2025 figures present projections based on 
available in-year data and forecasts. 
Source: Eurostat and European Commission forecasts and calculations. 

• 

In the EU, credit growth, defined as credit flows excl. FDI in % of the lagged debt stock excl. FDI, 
declined to 1.4% in 2024 (Graph 2.19.b) and in no country it exceeded the MIP-threshold of 13% 
(Graph  2.16).  Bank  loan  flows  to  EU  NFCs  showed  signs  of  a  recovery  in  early  2025.  This 

(13)  This increase was driven by a strong increase in FDI debt. Almost two-thirds of Luxembourg’s NFC debt is FDI debt while on 

average in the EU this share is about one-quarter. 

18 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISEBEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISECountries with consolidated non-financial corporate debt (in % of GDP) above 85% in 2024 in blueCountries with consolidated non-financial corporate credit flow excl. FDI (in % of debt stock excl. FDI in t-1) above 13% in 2024 in blue050100150200250300LUSECYDKNLBEIEFRFIATPTESMTDEEEHUITELCZBGHRSKLVSIPLLTROEUEA% of GDP2019202320242025fFundamentals benchmarkPrudential benchmarkMIP threshold 
          
 
2. Imbalances, risks and adjustment: main developments 

recovery, which was recorded in most countries, with Germany being a notable exception (Graph 
2.19.e),  is  in  line  with  the  European  Commission  Autumn  Forecast  which  expects  corporate 
borrowing  to  pick  up  amid  a  recovery  in  demand,  lower  interest  rates  and  increased  defence 
spending and investment.  

Graph 2.16: Credit growth of non-financial corporations 

s

(1) Corporate debt includes loans (F4) plus debt securities (F3) as defined in the financial balance sheet accounts. 
Corporate debt is consolidated, which means that transactions within the non-financial sector are excluded. 
Source: Eurostat and European Commission calculations. 

•  Borrowing costs rose in 2024 in almost all countries (Graph 2.17.b) but had peaked by the end 
of 2024. The interest coverage ratio (14) (ICR) decreased further in 2024 in most countries, 
including France, Germany, Italy and Spain as well as in the EU and euro area aggregates (Graph 
2.17.a). Quarterly data shows that the lowest point in the euro area was reached in  2024-Q3 
and most countries including Germany, Spain and Italy have since then seen their ICRs increase 
again.  

(14)  The  interest  coverage  ratio  is  calculated  as  gross  operating  surplus  over  total  interest  before  financial  intermediation 
services  indirectly  measured  (FISIM)  allocation  and  measures  how  easily  companies  can  pay  the  interest  on  their 
outstanding debt. 

19 

-15-10-5051015202530ELROCZEELTBGDKLVPLHRBEMTHUESPTFRDEFIATCYIESKNLITSELUSIEUEAAs a % of debt stock in year t-1201920232024MIP threshold   
 
Graph 2.17: Corporate interest coverage ratio and costs of borrowing 

2. Imbalances, risks and adjustment: main developments 

Notes: The interest coverage ratio is calculated as gross operating surplus over total interest before FISIM allocation. 
Source: ECB and Eurostat. 

•  Profit indicators deteriorated further in early 2024, but some have since stabilised. The profit 
shares of European NFCs have fallen in almost all countries during 2024 in the EU and the euro 
area  (Graph  2.18.a).  In  several  countries,  such  as  Austria,  Greece,  Portugal,  Germany,  Czechia, 
Poland,  Finland  and  Spain,  the  profit  shares  were  notably  below  their  pre-pandemic  averages. 
Similarly, unit profit growth and profit margins decreased in 2023 and the first half of 2024 but 
have since started to stabilise in many countries (Graph 2.18).  

Graph 2.18: NFC profit indicators 

Notes: Unit profit growth is calculated as gross operating surplus divided by real GDP growth. The profit margin is defined 
as gross operating surplus minus deprecation divided by net value added. 
Source: ECB, Eurostat and European Commission forecasts and calculations 

• 

In  almost  half  of  the  EU  countries,  the  share  of  non-performing  loans  (NPLs)  increased 
between 2023-Q4 and 2024-Q4, especially in Poland, Austria, Luxembourg and Germany, but in 
most  of  these  countries,  the  share  remains  low  by  historical  standards  (Graph  2.19.f). 
Bankruptcies  increased  to  above  pre-pandemic  levels  in  many  countries  including  Greece, 
Hungary, France, the Netherlands and Austria.  

20 

012345678IEEELVLTMTSKELSICYPTFIDEBEATITEAFRHRESLUNLPercent per annumb) Cost of borrowing (new business)2023-122024-122025-092019-12010203040506070ROMTSKHRLTSIIEDELVCYPLITELCZEEATESHUNLPTBESELUDKFIFRBG%a) Interest coverage ratio2022-Q42023-Q42024-Q42019-Q4-20246810123536373839404142431516171819202122232425Unit profit growth, %-change to previous yearProfit share in % of GDPa) Profit share and unit profit growth Profit share - EA20Profit share - EU27Unit profit growth - EA20Unit profit growth - EU270102030405060MTSKCYLTSILUHRLVNLROEEDKBEPLITCZSEFIDEESHUPTAT%b) Profit margins2019-Q42024-Q12025-Q12025-Q2          
       
Graph 2.19: Selected graphs on non-financial corporations 

2. Imbalances, risks and adjustment: main developments 

Notes: Net credit flows (debt transactions) correspond to transactions of loans (F4) and debt securities (F3) from the 
Eurostat financial transactions accounts. Data is consolidated, meaning that intrasectoral lending and borrowing is 
excluded. In panels c and d, “other changes” arise from valuation changes, debt writedowns and reclassifications. Panel f: 
The corresponding NPL ratios for 2019-Q4 for Cyprus and Greece are 24.8% and 38.2% respectively. 
Source: ECB, Eurostat and European Commission forecasts and calculations. 

21 

-1000000100000200000300000400000500000212223242512-month moving sum, Mio EURe) Bank loan flows to NFCs DEEA RestESFRITNLnon-EAEU total-113579111315PLBGATPTFRESIEMTNLELSKDKLTFI% of total loans and advancesf) Share of NFC NPLs2022-Q42023-Q42025-Q12019-Q4012345671415161718192021222324%b) EU credit flowsTotal debt - Flows in % of lagged debt stockTotal debt excl. FDI - Flows in % of lagged debt stockTotal loans - Flows in % of lagged debt stock6065707580859001030507091113151719212325% of GDPa) NFC debt-to-GDP ratiosEAEU-28-24-20-16-12-8-404812162024LUEEELCZDKLTHULVFIDEHRROSEPLFRATSKITBGBESIESPTMTCYNLIEEAEUPps. of GDPc) Decomposition of changes in NFCs debt-to-GDP ratios, 2024Net credit flowsReal GDP growthInflationOther changesDebt/GDP, change-20-15-10-505FREECZLTLVELSISKPLITFIROHRMTDEPTBGDKESATSEHUNLBECYIELUEAEUPps. of GDPd) Decomposition of changes in NFCs debt-to-GDP ratios, 2025Net credit flowsReal GDP growthInflationOther changesDebt/GDP, change        
2.6.  GOVERNMENT SECTOR 

2. Imbalances, risks and adjustment: main developments 

•  At the end of 2024, the government debt-to-GDP ratios were above the scoreboard threshold of 
60%  in  12  Member  States:  Belgium,  Germany,  Greece,  Spain,  France,  Italy,  Cyprus, 
Hungary, Austria, Portugal, Slovenia, and Finland.  

• 

• 

In  2024,  some  of  the  largest  government  deficits  in  the  EU  increased.  Deficits  worsened 
significantly  in  Romania,  Austria,  Bulgaria,  Finland,  and  Poland.  In  Belgium  and  France,  large 
deficits  increased  somewhat  further  and  to  a  lesser  extent  in  Slovakia  too.  A  strong 
improvement took place in Italy, and to a lesser extent in Hungary and Malta. Among countries 
with  highest  debts,  the  improvements  in  Greece  and  Italy  stood  out,  with  Greece  recording  a 
surplus in its government accounts (Graph 2.20). 

In  2025,  government  balances  are  expected  to  improve  in  most  EU  countries  with  large 
deficits,  except  in  Belgium  and  Poland,  but  very  often  by  small  margins.  On  the  contrary, 
balances are weakening in 2025 for those countries that recorded surpluses or modest deficits 
in 2024. For 2026, deficits are forecast to decline in the countries where they have been high in 
recent  years,  except  in  Belgium  and  Hungary.  In  2026,  expected  increases  in  Estonia  and 
Germany’s deficits stand out (Graph 2.20). 

Graph 2.20: Government balances across the EU 

Notes: Countries are ranked in decreasing order of the government balance (in % of GDP) in 2024 
Source: Eurostat and European Commission forecasts 

• 

In 2024, government debt ratios increased in over half of the EU countries. Debt increased in 
some  countries  where  it  is  high,  especially  France.  Conversely,  it  declined  further  notably  in 
Cyprus, Greece, Spain, and Portugal. In Austria and especially Finland debt ratios are lower, but 
increases  were  marked  in  2024.  Debt  ratios  increased  in  several  countries  with  readings  just 
below  60%  of  GDP  as  the  passive  deleveraging  effect  yielded  by  nominal  GDP  growth  was 
smaller. Among these countries, the debt increases were more pronounced in countries with high 
deficits:  Romania,  Poland,  and  Slovakia  too,  stood  out  in  that  respect.  Compared  with  the 
pre-pandemic period, among countries with debt now close to or above 60% of GDP, Romania 

22 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISECountries with general government gross debt (in % of GDP) above 60% in 2024 in blue-10-8-5-3035DKCYIEELLUPTSINLLTSEEELVHRCZDEBGESITMTBEFIATHUSKFRPLROEAEU% of GDP2022202320242025f2026f 
             
stands out with increases of some 20 pps of GDP, and France and Finland with some 15 pps. 
and 17 pps. rises respectively (Graph 2.21). 

Graph 2.21: Government debt across the EU 

2. Imbalances, risks and adjustment: main developments 

Notes: Countries are ranked in decreasing order of the government debt (in % of GDP) in 2024. EU and euro area 
aggregates for government debt are presented on a non-consolidated basis (i.e. not corrected for intergovernmental 
loans, including those made through the European Financial Stability Facility). 
Source: Eurostat and European Commission forecasts. 

•  Government debt ratios are expected to rise marginally in most of the EU in 2025 and 2026 
as sizeable deficits persist and passive deleveraging weakens further (Graph 2.22). Among the 
countries  with  debt  in  excess  of  60%  of  GDP  in  2024,  debt  may  increase  more  visibly  in 
Belgium, France, and Finland, and to a smaller extent also in Austria and Italy. Rises will be large 
in  Poland  and  Romania  too,  which  have  debts  just  below  60%  of  GDP  but  continued  high 
deficits. Debt dynamics are becoming more challenging as debts are rolled over at higher costs. 
Rates on long-term bonds have increased further in 2025, in particular for the best rated debt 
of the euro area (Grap 2.23.c and d). The rise in interest spending is, and will continue to be, of 
course more marked in countries where debt is rising faster and where average debt maturities 
are  shorter,  resulting  in  larger  gross  financing  needs  (Graph  2.23.b).  Hungary,  Finland,  Poland, 
and Romania stand out for expected increases in interest expenditure of more than 1 pp. of GDP 
over the years 2023 to 2026 (Graph 2.23.e). 

Graph 2.22: Drivers of the evolution of the gov’t debt-to-GDP ratios: post-pandemic and now 

Source: Eurostat and European Commission forecasts and calculations 

23 

020406080100120140160180ELITFRBEESPTFIATHUSICYDESKHRPLROLVMTNLCZIELTSEDKLUBGEEEAEU% of GDP2019202320242025f2026f-20-15-10-50510CZROFIEELVLUBGMTSKFRATHUDEPLNLSELTBESIDKESIEITHRPTCYELEAEUPps.a) 2021-2023 (annual average)Primary balanceInterest expenditureReal GDP growth effectInflation/GDP deflator effectStock flow adjustmentTotal change in debt ratio-20-15-10-50510FIBGPLROBEFRSKLTLVATITNLDEMTLUSEHUCZEEHRSIESDKPTIECYELEAEUPps.b) 2025fPrimary balanceInterest expenditureReal GDP growth effectInflation/GDP deflator effectStock flow adjustmentTotal change in debt ratio           
            
Graph 2.23: Selected graphs on the government sector 

2. Imbalances, risks and adjustment: main developments 

Source: Eurostat and European Commission forecasts and calculations. 

24 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISEEAEU020406080100120140160-10-505Government debt (% of GDP)Government balance (% of GDP)a) Govt balance and debt, 2024-10123452122232425%c) Yields on 10-y govt bonds in selected EA Member StatesDEBEELESFRITPTSK-113579112122232425%d) Yields on 10-y govt bonds in non-EA Member States and in GermanyDEBGCZDKHUPLROSE012345HUITELROESPLBEFRPTATSKFIHRSICZCYLVMTDELTBGSEDKNLIEEELUEAEU% of GDPe) Government interest expenditure2021202320242025f2026fBEBGCZDKDEEEELESFRHRITLVLTLUHUNLPLPTROSISKFISEATCYIEMT02040608010012014016001234Debt, 2024 (% of GDP)Govt defence spending, 2024 (% of GDP)f) Defence spending and government debtNATO membersNot NATO members0510152025ITFRBEFIROESATPLHUDESKSEPTHRELMTNLSILVLTCZEEBGDKLUCYIE% of GDPb) Gross financing needs202320242025f2026f 
   
2. Imbalances, risks and adjustment: main developments 

2.7.  FINANCIAL SECTOR 

• 

In  2024,  the  EU  banking  sector  maintained  high  profitability  and  low  non-performing 
loans  (NPLs)  amid  slowly  recovering  credit  growth.  Over  2024,  the  financial  system  was 
marked  by  geopolitical  and  economic  uncertainty,  while  interest  rates  and  inflation  declined. 
Despite these challenges, EU banks remained well capitalised and their asset quality robust. The 
return on equity (RoE) remained with 9.1% in 2024 at historic highs attained also in 2023 (15). 
The Tier 1 ratio of EU banks remained stable, and in 2024 it stood at  17.9% of risk-weighted 
assets (Graph 2.24.a). Relatively low profitability and capitalisation can be found in the banking 
systems in Germany and France. NPLs remained stable overall in 2024, standing at 1.9% (Graph 
2.24.b). The highest NPLs ratio, 3.9%, was attained in Poland, followed by Cyprus and Greece.  

•  EU  banks  gained  strength  in  2024  with  rising  valuations  and  a  gradual  credit  recovery. 
The valuations of EU banks increased since mid-2024, outperforming their US peers. This was 
driven by robust earnings growth and profitability, strong capital and liquidity positions but also 
enhanced  efficiency  by  growth  in  digital  services  and  ongoing  domestic  and  cross-border 
banking consolidation. Credit growth started to recover at the end of 2024 in the euro area amid 
a partial decline of lending rates for households and NFCs (Graph  2.25.a, b) and still relatively 
tight  credit  conditions.  As  in  previous  years,  household  and  corporate  credit  remained  rather 
dynamic  in  some  non-EA  countries,  namely  Bulgaria,  Romania  and  Hungary  (16).  In  2025,  EU 
bank  valuations  surged  by  over  40%  year-to-date  through  October.  Credit  growth  in  2025 
rebounded strongly, with total bank lending in the euro area expected to expand by about 3.1%.  

Graph 2.24: Banking sector: profitability, capital ratios and non-performing loans 

Notes: a) The Common Equity Tier 1 (CET1) ratio encompasses ordinary shares and retained earnings. CET1 ratio and 
return on equity are average of quarterly data over the year. The average value for the EU is unweighted by the economy 
size. 
Source: ECB Consolidated Banking Data and European Commission. 

Banking  systems  in  some  EU  countries  have  been  significantly  exposed  to  real  estate 
with  mortgages  representing  almost  50%  of  banks’  assets  (Graph  2.25.c).  The  highest 
exposure can be found in Sweden, Slovakia, Estonia and Denmark. The correction in EU residential 

(15)  EBA Risk Dashboard, 2024-Q4. 

(16) 

25 

02468PLCYGRITROBGESATHRPTHUFRSKMTBESIDEEEFINLDKLVCZSEIELULT% of total gross loans b) Non-performing loans 2024-Q42025-Q12019-Q4BEDEEEIEELESFRHRITLVLTLUMTNLATPTSISKFIBGCZHUPLROSE468101214161820141618202224Return on equity in % (2024)Tier1 ratio in % (2024)a) Profitability and capital ratiosEU aggregateEU MedianDK          
 
2. Imbalances, risks and adjustment: main developments 

real estate through 2024 and into 2025 has remained relatively contained, but with considerable 
variation among Member States, and house prices are growing again. Segments of commercial real 
estate, particularly the office sector, have undergone a much more significant adjustment. Office 
vacancy rates in Europe hit 8.8% at the end of 2024, up from 8.6% earlier in the year, with much 
higher vacancy in peripheral districts and secondary stock. However, large urban centres continue to 
post vacancy rates below 6%, as occupiers focus on prime, energy-efficient space.  

The  high  exposure  of  the  financial  sector  to  domestic  sovereign  debt  (Graph  2.25.d) 
increases risks of feedback loops in those Member States that are highly indebted (see Section 2.6. 
on the government sector) or rely on foreign currency funding. The exposure of banks (in terms of 
total  assets)  towards  their  domestic  sovereigns  is  the  highest  in  Romania  (27%),  Poland  (21%), 
Hungary (19%), Croatia (18%) and Italy (16%). Banking sectors that have a strong domestic bias 
tend  to  be  more  exposed  to  changes  in  their  home  country's  fiscal  and  economic  conditions.  EU 
sovereign  debt  is  under  renewed  pressure  in  2024  and  2025  due  to  a  combination  of  high  debt 
levels,  increasing  bond  issuance  in  some  Member  States,  rising  interest  costs  (increasing  cost  of 
refinancing maturing debt) and weak nominal GDP growth.  

26 

Graph 2.25: Selected graphs on the financial sector 

2. Imbalances, risks and adjustment: main developments 

Notes: d) Loans vis-a-vis domestic general government reported by MFIs and holdings of debt securities issued by 
domestic general government reported by MFIs, divided by total assets/liabilities reported by MFIs. The data for the euro 
area countries suggest that MFIs’ exposures to non-domestic sovereigns are very limited compared to those to domestic 
sovereigns. The exposure of all sovereign debt holding for the euro area aggregate is 6.5% as of 9/2025. 
Source: Eurostat, ECB and European Commission calculations. 

27 

012345622232425%a) Bank interest rate on loans to corporations  –EADEFRITESEA02468101214161822232425%b) Bank interest rate on loans to corporations  –non-EACZHUPLSEBGRODK051015202530ROPLHUHRITCZSKGRESBGSIMTPTATBECYDEFRFISEEELVLTNLDKIELU% of banks assetsd) Exposure of banks to domestic sovereign debt2015-122019-122025-062025-090102030405060708090100DKSESKEEFINLLVBEPTMTLTCZBGCYDEPLESSIITHRHUROGRIEFRLUEAEU% of total assetsc) Mortgages and bank loans for house purchase, 2024Mortgage to householdsMortgage to NFCsTotal mortgageLoans for house purchase   
3. COUNTRY SECTIONS 

BELGIUM 

Unfavourable cost competitiveness developments have abated somewhat. Nominal unit labour cost 
slowed  down  and  increased  less  than  the  euro  area  average  in  2024  while  the  core  inflation 
differential  against  the  euro  area  narrowed,  easing  concerns  about  cost  competitiveness.  Public 
debt levels remain high amid lower nominal GDP growth, with widening government deficits further 
contributing  to  an  increase  in  the  government  debt-to-GDP  ratio.  Private  debt  ratios  also  remain 
high, but the associated risks appear limited.  

Real  GDP  growth  reached  1.1%  in  2024  and  is  forecast  to  stand  at  1.0%  in  2025  and  1.1%  in 
2026. Headline inflation rebounded to 4.3% in 2024, but it is expected to ease to 2.8% in 2025. 
Core  inflation  decreased  to  3.4%  in  2024  and  is  forecast  to  decrease  to  2.1%  in  2025,  slightly 
below the euro area average. The unemployment rate remained close to historical lows in 2024, at 
5.7%. It is expected to increase to 6.0% in 2025.  

The  scoreboard  reading  for  Belgium  shows  that  five  indicators  were  beyond  their  indicative 
thresholds  in  2024,  namely  export  performance,  nominal  unit  labour  costs,  household  debt, 
non-financial corporations debt, and government debt. Relevant developments worth highlighting: 

•  External sustainability indicators remained stable in 2024, with a current account deficit at 
0.4%  of  GDP  and  a  high  but  relatively  stable  net  international  investment  position  (NIIP)  at 
58.6% of GDP. The current account deficit is expected to slightly increase in 2025, as domestic 
demand remains relatively strong.  

•  Competitiveness  developments  reflect  the  moderation  of  inflation,  and  weak  export 
performance. ULC grew by less than the euro area average in 2024, due to lower nominal wage 
increases  alongside  some productivity  gains,  and the  3-year  change  was  15.1%  (vs.  14.6% in 
the  EA).  The  2024  HICP-based  REER  (17)  appreciated  by  2.2%,  due  to  nominal  exchange  rate 
gains and positive inflation differentials, with the strong euro supporting a further appreciation 
in  the  first  half  of  2025.  In  parallel,  Belgium’s  3-year  change  in  export  market  share  against 
advanced economies deteriorated in 2024, dropping by 14%, marking one of the largest losses 
in the EU. However, this drop was accompanied by a reduction in imports, and reflects the base 
effect associated with transitory large increases in exports in 2021. 

•  Persistently  high  non-financial  corporate  debt,  subdued  activity,  and  a  weak  debt  service 
capacity  pose  challenges  to  the  NFC  sector.  Despite  a  decline,  NFC  debt-to-GDP  remained 
elevated  at  95%  in  2024.  Credit  growth  increased  to  5%  in  2024.  While  profit  indicators 
improved, the Interest Coverage Ratio (ICR) (18) is one of the lowest in the EU and hit its lowest 
value  in  over  a  decade  in  2024.  Borrowing  costs  have  come  down  from  their  post-pandemic 
peak in the start of 2024 and will likely translate into an improved debt service capacity from 

(17)  Unless otherwise specified, REER refers to HICP-based REER, 42 trading partners 

(18)  The interest coverage ratio is calculated as gross operating surplus over total interest before FISIM allocation and measures 

how easily companies can pay the interest on their outstanding debt. 

28 

 
 
 
3. Country sections 

2025 onwards. Deleveraging is expected to slow as a recovery in demand and more favourable 
financing conditions are likely to boost borrowing. 

•  The household debt ratio plateaued at around 56% of GDP in 2024 (75% of gross household 
disposable  income  (GHDI)  in  2024),  the  lowest  level  observed  over  the  last  decade,  but  is 
expected  to  rebound  in  2026.  Borrowing  costs  on  new  loans  peaked  at  the  end  of  2023  at 
almost  4%  and  have by  2025-Q3  come  down  to  a bit  above  3%,  but  borrowing  costs  on  the 
stock  of  outstanding  loans  continue  to  increase  slowly.  With  net  credit  flows  gradually 
recovering against a background of disinflation and subdued real GDP growth, the debt ratio is 
expected to remain above the MIP threshold of 55% over the next years. In 2024, households’ 
gross  saving  rate  remained  above  its  pre-pandemic  level,  but  below  its  longer-term  average 
since 2000.  

•  House  prices  increased  by  3.2%  in  2024  and  continue  to  grow  moderately  in  2025.  The 
decrease  in  interest  rates  combined  with  rising  incomes  led  to  a  7.0%  increase  in  borrowing 
capacity in 2024, supporting the growth of house prices. The price-to-income ratio was 4 pps. 
above the long-term average, suggesting house prices are slightly elevated relative to income. 
Overvaluation  stood  at  12%.  Building  permits  declined  to  583  m²  per  1000  persons  but  still 
point to a relatively adequate level of housing supply (19). 

•  Government debt is high and increasing as a result of large and widening deficits. Government 
debt edged up to 103.9% of GDP in 2024, some 6 percentage points (pps.) above its pre-COVID-
19 level. Debt is forecast to increase further in 2025 and 2026. The government deficit remains 
high and worsened in 2024 to 4.4% of GDP and is forecast to increase again this year and next. 
Gross  financing  needs  are  high.  The  average  debt  maturity  is  among  the  longest  in  the  euro 
area  though,  which  slows  down  the  pass-through  of  higher  interest  rates  into  the  rapidly 
increasing  interest  expenditure.  Spreads  on  Belgian  long-term  sovereign  bonds  compared  with 
the best rated euro area sovereign debt have been overall stable. An excessive deficit procedure 
for  Belgium  has  been  in  place  since  July  2024.  Fiscal  sustainability  risks  remain  high  in  the 
medium term (20). 

•  The  financial  sector  remains  sound.  In  2024,  the  Tier  1  capital  ratio  was  rather  stable, 
profitability remained high, and the NPL ratio remained low. Stage 2 loans significantly declined 
in 2024 and are close to levels in other euro area countries. Credit dynamics gradually expanded 
in 2024 and 2025.  

(19)  EU last decade average stands at around 450 m² per 1000 persons. 

(20)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

29 

 
Graph 3.1: Selected graphs, Belgium 

3. Country sections 

Source: Eurostat and European Commission forecasts and calculations. 

Table 3.1:  Key economic and financial indicators, Belgium 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

30 

0501001502002503003501112131415161718192021222324% of GDPb) Decomposition of debt by sectorNon-financial corporationsHouseholds (+NPISH)GovernmentPrivate sector-10-5051015141516171819202122232425f26fPps.a) Decomposition of rate of change of ULC Inflation (HICP)Real Compensation/hr.Productivity/hr. (neg. contrib.)ULCULC in EU27averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)1.91.71.71.11.01.1Real GDP per capita (1 year % change)1.51.10.90.50.50.7GDP deflator (1 year % change)1.93.65.51.92.51.9Harmonised index of consumer prices (1 year % change)1.94.62.34.32.81.8Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.42.26.03.42.11.8External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%0.30.40.0-0.7-0.3-0.5Current account balance, balance of payments (% of GDP)0.5 (1)-0.9 (2)0.00.30.2-0.4-0.6-0.6of which: trade balance (% GDP)0.40.4-0.2-0.4of which: income balance (% GDP)-0.4-0.10.40.0Net international investment position (% of GDP)-35%-86.2 (3)17.1 (4)45.653.952.658.653.251.9NENDI - NIIP excluding non-defaultable instruments (% of GDP)38.932.728.628.6Net lending-borrowing (% of GDP)0.10.40.4-0.5CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)3.26.215.015.112.47.7Nominal unit labour cost index per hour worked (1 year % change)1.53.16.52.43.12.0Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)3.61.60.01.6-1.51.8Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.90.6-0.52.20.3-0.2Export performance against advanced economies (3y % change)-3%1.24.7-6.6-13.9-10.3-5.4Export performance against advanced economies (1 year % change)0.10.6-4.1-3.7-2.00.5Core inflation differential vis-à-vis the euro area (pps.)0.40.21.00.5-0.3-0.4CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%65.4 (5)49.7 (6)123.0113.297.094.892.091.7NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%-0.30.82.45.00.74.0Households and housing marketHousehold debt, consolidated (% of GDP)+55%47.3 (5)59.0 (6)59.662.356.656.356.156.5Household debt, consolidated (% of GHDI)81.282.675.675.0Household credit flow, consolidated (% debt stock t-1)+14%5.34.82.32.43.33.8House price index, nominal (1 year % change)+9%3.45.52.33.23.02.0House prices over/undervaluation gap (7)12.717.213.412.4Standardized price-to-income ratio106.1109.0102.0102.5Building permits (m2 per 1000 inh)790.2781.6670.6582.6GovernmentGeneral government gross debt (% of GDP)60%100.2107.8102.4103.9107.1109.9General government balance (% of GDP)-1.3-6.0-4.0-4.4-5.3-5.5Banking sectorReturn on equity of banks (%)8.58.611.410.4Tier-1 capital ratio banking sector (% risk-weighted assets)16.718.517.917.6Gross non-performing loans, domestic and foreign entities (% gross loans)2.41.71.61.81.7Cost of borrowing for households for house purchase (%)1.91.73.63.43.2Cost of borrowing for NFCs (%)1.61.74.74.93.7Labour marketUnemployment rate (% labour force Y15-74)+10%5.7 (8)6.25.95.55.76.06.2Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp0.81.02.11.10.71.2           forecast      
 
 
        
 
3. Country sections 

BULGARIA 

Wage pressures remain elevated, and house prices continue to increase rapidly amid strong credit 
growth, leading to increased macroeconomic risks. Following a decrease in 2024, inflation ticked up 
in early 2025 and again in recent months, while continued strong rises in nominal unit labour costs 
risk fuelling further price pressures. House prices have been increasing strongly for some years in 
tandem  with  accelerating  household  borrowing,  against  a  backdrop  of  supportive  financial 
conditions. 

Real  GDP  growth  reached  3.4%  in  2024  and  is  forecast  at  3.0%  in  2025  and  2.7%  in  2026. 
Headline inflation decreased to 2.6% in 2024, but it has rebounded and is expected to reach 3.5% 
in  2025.  With  core  inflation  decreasing  to  3.1%  in  2024,  its  differential  against  the  euro  area 
narrowed to 0.3 pps. in 2024 before increasing slightly in 2025. The unemployment rate stood at 
4.2% in 2024 and is expected to decrease in 2025, to 3.5%.  

The  scoreboard  reading  for  Bulgaria  shows  that  three  indicators  were  beyond  their  indicative 
thresholds  in  2024,  namely  nominal  unit  labour  costs,  house  prices,  and  households  credit  flow. 
Relevant developments worth highlighting: 

•  External  sustainability  indicators  remain  close  to  balance,  although  the  current  account 
deficit  increased  in  2024,  reaching  1.6%  of  GDP.  The  current  account  balance  is  forecast  to 
improve but to remain in deficit in 2025. The slightly negative NIIP continued to narrow in 2024, 
while the NIIP excluding non-defaultable instruments (NENDI) remained strongly positive.  

•  Competitiveness concerns relate to strong labour cost increases. Inflation decelerated in 2024 
but recorded a short burst in early-2025, fuelled by services and processed food inflation, and 
has rekindled again in recent months, with a 4.1% annual increase in September. Last year, ULC 
continued  to  grow  strongly,  by  12%  (with  a  38%  cumulated  3-year  change),  despite 
considerable  productivity  gains,  pushed  by  strong  nominal  wage  increases,  especially  in  the 
public  sector.  In  2025,  ULC  growth  is  expected  to  be  even  more  robust.  In  2024,  the  REER 
flattened out, as the strong nominal exchange rate appreciation was offset by negative inflation 
differentials  against  trading  partners.  By  mid-2025,  it  started  to  marginally  appreciate  on 
account  of  the  euro  peg.  Although  Bulgaria  lost  export  market  share  in  2024,  both  against 
advanced economies and the world, the 3-year change remains positive. 

•  The  non-financial  corporate  sector  has  remained  solid.  NFC  debt-to-GDP  has  been  on  a 
declining path since 2013 and fell to 46% in 2024, supported by strong nominal GDP growth. 
Credit  growth  remained  solid  at  7.5%  and  with  bank  loan  flows  maintaining  an  upward  trend 
over  2024,  deleveraging  is  expected  to  cease.  A  moderate  increase  in  bankruptcies  was 
accompanied by a simultaneous rise in new business registrations. The share of NPLs continued 
to fall but remained above other EU countries.  

•  As  credit  growth  continued  accelerating,  the  household  debt  ratio  increased  by  2  pps.  to 
around  26%  of  GDP  in  2024,  which  is  still  a  relatively  low  level.  Credit  growth  has  been 
exceeding  the  MIP  threshold  (14%  of  the  previous  year’s  debt  stock)  since  2021,  surpassing 
21%  in  2024.  In-year  data  indicates  that  credit  growth  continued  at  a  high  level  in  2025.  In 
contrast  to  most  other  EU  countries,  borrowing  costs  have  not  increased  and  lending  has  not 
decelerated since 2022. The debt ratio is expected to continue growing over the coming years. 
Historical data from the non-financial  accounts indicate a negative household saving rate, but 

31 

3. Country sections 

recent  data  are  not  available  (21).  Although  it  continued  to  decline  in  2024,  the  proportion  of 
non-performing loans, around 3% of overall bank loans to households, remained significant. 

•  House prices increased strongly, by 16.5%, in 2024 and maintained strong growth in the first 
half of 2025. House price growth had already been high in earlier years, and the current path is 
likely  to  continue.  House  prices  are  supported  by  rising  incomes,  which  increased  by  10.1%  in 
nominal terms in 2024, and by low mortgage interest rates. The price-to-income ratio was 31 
pps.  below  its  long-term  average,  suggesting  house  prices  are  moderate  relative  to  income. 
Overvaluation stood at 12%. Building permits declined moderately to 714 m² per 1000 persons 
but still point to an adequate level of housing supply (22).  

•  Government  debt  remains  low  even  if  increasing  recently.  Debt  came  to  23.8%  of  GDP  in 
2024 and is forecast to increase somewhat significantly in 2025 but to remain contained. The 
fiscal deficit increased to 3% of GDP in 2024 and is forecast to remain at that level in 2025 and 
to recede only very slightly  in 2026. Some three quarters of the debt is denominated in euro, 
but  the  imminent  euro  accession  will  eliminate  those  risks  of  exchange  rate  volatility  for 
government finances. Fiscal sustainability risks remain medium in the medium term (23). 

•  The financial sector remains stable, with credit growth continuing to show strength. In 2024, 
the  Tier  1  capital  ratio  and  return  on  equity  remained  well  above  the  EU  median.  The  non-
performing loans ratio declined marginally to 2.6% in 2024 and remains above the EU median. 
Stage  2  loans  and  forborne  loans  remain  high.  Credit  growth  has  been  very  strong,  both  for 
companies and for households, amid favourable credit conditions, reflecting the high liquidity in 
the  banking  sector  on  account  of  marked  deposits  growth.  While  borrower-based 
macroprudential measures were introduced for the first time in late 2024 (24), mortgage credit 
growth  has  still  been  accelerating  in  2025.  Preparations  for  euro  adoption  drove  strategic 
adjustments in banking operations and regulatory compliance efforts. 

Graph 3.2: Selected graphs: Bulgaria 

Source: Eurostat and European Commission forecasts and calculations. 

(21)  Important discrepancies exist between data on household saving from the non-financial and the financial accounts. 

(22)  EU last decade average stands at around 450 m² per 1000 persons. 

(23)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

(24)  Measures include requirements on loan-to-value ratio of 85%, debt service to income of 50% and a maximum maturity of 

30 years. 

32 

-1001020141516171819202122232425f26fPpsa) Decomposition of rate of change of ULC Inflation (HICP)Real Compensation/hr.Productivity/hr. (neg. contrib.)ULCULC in EU270501001502000510152025303517192123252015 = 100Rate of change y-o-y (%)b) Evolution of House Price Index and MFI Loans for House Purchase -BulgariaMFI loans for house purchase (y-o-y growth rate)Nominal House Price Index (2020=100), right axisReal House Price Index (2020=100), right axis      
 
 
 
Table 3.2:  Key economic and financial indicators, Bulgaria 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

33 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)2.92.81.73.43.02.7Real GDP per capita (1 year % change)4.43.62.03.53.12.8GDP deflator (1 year % change)4.89.08.07.25.83.5Harmonised index of consumer prices (1 year % change)2.15.58.62.63.52.9Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.13.48.93.12.92.5External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%2.10.0-1.5-1.7-1.0-0.9Current account balance, balance of payments (% of GDP)-1.0 (1)-2.4 (2)1.9-1.1-0.9-1.6-0.7-0.5of which: trade balance (% GDP)3.52.04.12.5of which: income balance (% GDP)-1.6-3.1-5.0-4.1Net international investment position (% of GDP)-35%-46.2 (3)-18.1 (4)-37.4-15.9-6.3-4.4-5.7-5.5NENDI - NIIP excluding non-defaultable instruments (% of GDP)36.146.146.543.9Net lending-borrowing (% of GDP)3.0-0.10.70.1CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)18.718.627.137.737.928.9Nominal unit labour cost index per hour worked (1 year % change)6.17.411.212.110.64.0Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)1.85.58.57.32.71.0Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)1.61.95.4-0.30.70.5Export performance against advanced economies (3y % change)-3%10.39.915.56.3-3.0-1.7Export performance against advanced economies (1 year % change)2.95.4-0.7-1.70.00.4Core inflation differential vis-à-vis the euro area (pps.)0.11.44.00.30.50.4CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%101.9 (5)55.6 (6)72.258.948.045.944.744.7NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%4.04.08.27.57.77.9Households and housing marketHousehold debt, consolidated (% of GDP)+55%83.7 (5)25.8 (6)22.923.423.625.628.431.8Household debt, consolidated (% of GHDI)34.336.7Household credit flow, consolidated (% debt stock t-1)+14%10.011.916.321.120.519.3House price index, nominal (1 year % change)+9%7.19.09.916.515.010.0House prices over/undervaluation gap (7)-5.9-0.33.811.8Standardized price-to-income ratio83.380.773.766.9Building permits (m2 per 1000 inh)586.8717.8837.7714.1GovernmentGeneral government gross debt (% of GDP)60%22.523.622.923.828.530.6General government balance (% of GDP)1.8-3.6-2.0-3.0-3.0-2.7Banking sectorReturn on equity of banks (%)11.18.316.315.2Tier-1 capital ratio banking sector (% risk-weighted assets)19.721.920.921.7Gross non-performing loans, domestic and foreign entities (% gross loans)8.14.82.92.72.6Cost of borrowing for households for house purchase (%)3.42.72.62.52.5Cost of borrowing for NFCs (%)3.72.74.04.34.1Labour marketUnemployment rate (% labour force Y15-74)+10%4.0 (8)6.25.24.34.23.53.7Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp3.20.81.31.71.42.3           forecast 
      
 
3. Country sections 

CZECHIA 

Competitiveness  developments  have  become  more  favourable.  Headline  and  core  inflation  have 
decreased and the core inflation gap with the euro area is expected to narrow further. ULC growth 
moderated considerably. Lower inflation and currency depreciation contributed to a depreciation of 
the REER in 2024, while the current account balance recorded a surplus. Following a contraction in 
2023, house prices rebounded and show signs of overvaluation.  

Real  GDP  growth  reached  1.2%  in  2024  and  is  forecast  at  2.4%  in  2025  and  1.9%  in  2026. 
Headline inflation decreased strongly to 2.7% in 2024 and has decreased slightly further in 2025, 
when it is forecast to reach 2.3%. With core inflation decreasing to 4.1% in 2024, the core inflation 
differential against the euro area narrowed to 1.2 pps. and it has narrowed further in 2025 (with 
core inflation forecast at 3.0%). The unemployment rate stood at 2.6% in 2024 and is expected to 
increase slightly to 2.7% in 2025.  

The  scoreboard  reading  for  Czechia  shows  that  two  indicators  were  beyond  their  indicative 
thresholds  in  2024,  namely  nominal  unit  labour  costs  and  the  real  effective  exchange  rate. 
Relevant developments worth highlighting: 

•  External  sustainability  indicators  continue  to  strengthen,  as  the  current  account  balance 
reached  a  surplus  of  1.7%  of  GDP  in  2024  and  is  forecast  to  remain  in  surplus  in  2025.  The 
negative  NIIP  continued  to  reduce  from  -14.4%  in  2023  to  -7.1%  of  GDP  in  2024  and  is 
expected to further moderate in 2025. The NENDI has remained positive. 

•  Competitiveness  concerns  receded  due  to  decelerating  inflation.  In  2024,  core  inflation 
decreased  considerably,  but  headline  hovered  above  2.5%  for  most  of  the  year.  In  2024,  the 
REER  depreciated  by  4.4%,  due  to  both  nominal  exchange  rate  depreciation  and  negative 
inflation differentials, while gaining more than 14% in 3 years. The trend continued in the first 
half  of  2025,  albeit  at  smaller  magnitudes.  ULC  growth  moderated  considerably,  due  to 
decelerating nominal wage increases and productivity gains, but the 3-year change was 20.3%. 
Following  the  strong  recovery  in  2023,  Czechia’s  export  market  share  against  advanced 
economies dropped slightly last year. 

•  The  non-financial  corporate  sector  has  remained  resilient  and  is  characterised  by  low 
leverage, healthy credit demand and a solid debt service capacity. Czechia was one of the few 
countries to record an increase in its  NFC  debt-to-GDP ratio, reaching 47.2%, as credit growth 
increased to 9.5%. Bank loan flows to  NFCs picked up in the first half of 2025, and,  together 
with  easing  financing  conditions  and  a  recovery  in  demand,  the  debt  level  is  expected  to 
increase  slightly to  around  49%  of  GDP  in  the  coming  years.  NFC profitability  indicators  have 
remained resilient, and debt service capacity solid.  

•  After  three  years  of  deleveraging,  the  household  debt  ratio  remained  flat  at  31%  in  2024 
(43% of GHDI) and is expected to rebound in 2025. While credit growth declined somewhat in 
2024,  it  remained  significant,  putting  a  brake  on  deleveraging.  While  household investment  in 
homes  plateaued,  households’  financial  saving  has  boomed  since  2019,  and  the  gross  saving 
rate remains around 20%, 8 pps. above its pre-pandemic level. Real consumption has remained 
flat  since  2019,  in  line  with  employee  compensation,  despite  a  rise  in  income  from  other 
sources  such  as  property (+3  pps.  of  GHDI)  and  government (tax-benefit)  transfers  (+5pps.  of 
GHDI). 

•  House  prices  increased  by  5.0%  in  nominal  terms  in  2024  and  accelerated  in  the  first  half 
2025.  The  price-to-income  ratio  was  13  pps.  above  the  long-term  average,  suggesting  house 

34 

3. Country sections 

prices  are  elevated  relative  to  income.  Overvaluation  stood  at  15%,  following  years  of  strong 
increases  in  house  prices  and  only  short-term  price  adjustment  in  2023.  Building  permits 
remained low, at 3301330 m² per 1000 persons, indicating potential supply constraints (25). The 
recent evolution in house prices has been supported by the decrease in interest rates combined 
with rising incomes that led to a 12.4% increase in borrowing capacity in 2024. 

•  Government debt remains limited, although it has been increasing recently. It reached 43.3% 
of  GDP  in  2024,  approximately  14  pps.  above  its  pre-COVID-19  level.  It  is  forecast  to  be 
essentially unchanged in 2025. The government deficit decreased to 2% of GDP in 2024 and is 
expected to remain around that level this year and next. Spreads on Czech long-term sovereign 
bonds vis-à-vis the best rated sovereign debt of the EU have been stable. Fiscal sustainability 
risks remain medium in the medium term (26). 

•  The  financial  sector  remained  sound.  The  banking  sector  remained  well  capitalised,  and 
significantly increased its profitability in 2024, surpassing the EU median despite the continued 
imposition of windfall taxes. The non-performing loans ratio remains very low. Credit recovered 
in  2024,  driven by  a  significant  rebound in mortgage  lending  alongside  a  decline in mortgage 
interest  rates.  The  share  of  corporate  loans  denominated  in  euros  rose  to  52%  in  2024, 
reflecting ongoing euroization in the corporate segment. 

Graph 3.3: Selected graphs, Czechia 

Source: Eurostat and European Commission forecasts and calculations. 

(25)  EU last decade average stands at around 450 m² per 1000 persons. 

(26)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

35 

-6-4-2024681012101112131415161718192021222324Pps.a) HICP/CPI-based REER, 42 part.ΔNEERΔInfl.REER-40-200204060091113151719212325% deviation of current priceb) Overvaluation gap with respect to price/income, price/rent and fundamental model valuation gapsModel-based valuations gapPrice to income vs. hist. avg.Price to rent vs. hist. avg.Overall valuation gap     
 
 
Table 3.3:  Key economic and financial indicators, Czechia 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

36 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)3.90.40.01.22.41.9Real GDP per capita (1 year % change)3.7-0.2-1.01.12.21.7GDP deflator (1 year % change)2.85.78.63.93.43.0Harmonised index of consumer prices (1 year % change)2.37.012.02.72.32.1Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)2.06.29.34.13.02.7External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%1.1-0.3-2.3-1.01.21.9Current account balance, balance of payments (% of GDP)0.9 (1)0.3 (2)0.7-1.7-0.11.71.92.1of which: trade balance (% GDP)6.63.84.96.5of which: income balance (% GDP)-5.8-5.5-5.0-4.7Net international investment position (% of GDP)-35%-66.3 (3)10.8 (4)-22.8-17.0-14.4-7.1-6.8-2.7NENDI - NIIP excluding non-defaultable instruments (% of GDP)27.732.328.533.8Net lending-borrowing (% of GDP)1.4-0.51.03.5CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)11.816.618.420.319.013.7Nominal unit labour cost index per hour worked (1 year % change)4.65.48.45.34.33.5Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)8.48.024.314.43.9-2.1Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)2.84.410.1-4.41.31.4Export performance against advanced economies (3y % change)-3%4.2-1.90.61.34.21.6Export performance against advanced economies (1 year % change)0.9-1.66.8-1.11.91.3Core inflation differential vis-à-vis the euro area (pps.)0.94.24.41.20.60.5CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%75.3 (5)61.0 (6)48.446.044.947.247.949.2NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%5.64.98.29.57.47.9Households and housing marketHousehold debt, consolidated (% of GDP)+55%52.7 (5)47.5 (6)31.233.030.730.631.232.1Household debt, consolidated (% of GHDI)48.247.143.343.3Household credit flow, consolidated (% debt stock t-1)+14%7.26.94.33.77.78.2House price index, nominal (1 year % change)+9%9.814.9-1.75.010.08.0House prices over/undervaluation gap (7)-1.817.215.915.0Standardized price-to-income ratio102.3115.3112.7112.7Building permits (m2 per 1000 inh)367.0425.1340.1330.4GovernmentGeneral government gross debt (% of GDP)60%31.740.042.243.343.444.1General government balance (% of GDP)0.9-4.6-3.7-2.0-1.8-2.0Banking sectorReturn on equity of banks (%)13.410.613.715.1Tier-1 capital ratio banking sector (% risk-weighted assets)18.220.519.519.2Gross non-performing loans, domestic and foreign entities (% gross loans)2.21.71.21.21.2Cost of borrowing for households for house purchase (%)2.63.05.45.04.7Cost of borrowing for NFCs (%)2.74.08.56.55.3Labour marketUnemployment rate (% labour force Y15-74)+10%2.5 (8)2.42.52.62.62.73.0Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp2.20.30.70.9           forecast 
      
 
3. Country sections 

DENMARK 

The high current account surplus increased further in 2024 and is expected to remain elevated in 
2025. With low inflation, competitiveness developments have been favourable, and Denmark has 
recorded export performance gains. Household debt levels remain high despite a recent decrease 
and  house  prices  show  signs  of  overvaluation,  but  the  associated  macroeconomic  risks  appear 
limited.  

Real  GDP  growth  reached  3.5%  in  2024  and  is  forecast  at  2.0%  in  2025  and  2.1%  in  2026. 
Headline  inflation  decreased  to  1.3%  in  2024.  It  rebounded  slightly  and  is  expected  to  stand  at 
1.9%  in  2025,  while  core  inflation,  which  decreased  to  1.3%  in  2024,  would  increase  slightly  to 
1.6% in 2025 and remain below the euro area average. The unemployment rate stood at 6.2% in 
2024 and is expected to decrease to 6.1% in 2025.  

The  scoreboard  reading  for  Denmark  shows  that  three  indicators  were  beyond  their  indicative 
thresholds  in  2024,  namely  the  current  account  surplus,  household  debt,  and  non-financial 
corporations debt. Relevant developments worth highlighting: 

•  External  sustainability  concerns  related  to  the  high  current  account  surplus  remain.  The 
Danish current account surplus increased from 11% of GDP in 2023 to 12.2% in 2024 and is 
forecast to remain elevated in 2025. The pharmaceutical industry’s success as well as relatively 
sluggish domestic demand have resulted in Denmark to have one of the highest current account 
surpluses  in  the  EU  in  2024.  The  levels  far  exceeded  the  levels  explained  by  economic 
fundamentals, remaining beyond the indicative upper scoreboard threshold. This surplus reflects 
a discrepancy between savings and investment in the corporation and government sector. The 
NIIP  increased  by  almost  30  pps.,  reaching  69%  of  GDP  in  2024,  mainly  on  the  back  of  the 
current account surplus and valuation effects.  

•  Competitiveness developments reflect low inflation and strong export performance. In 2024, 
average  headline  and  core  inflation  rates  were  among  the  lowest  in  the  EU  (coming  in  below 
1.5%)  and  remained  so throughout the  first  half  of 2025.  ULC  growth  was  below  2%  against 
the  background  of  strong  productivity  gains  and  muted  nominal  wage  increases,  while  the  3-
year change was 11.6%. Last year, the REER depreciated slightly as nominal appreciation was 
more than offset by negative inflation differentials, but it remained stable by mid-2025. The 3-
year  change  in  exports  market  shares  against  advanced  economies  stood  at  close  to  9%, 
marking one of the best performances in the EU. 

•  The non-financial corporate sector  is highly leveraged but levels of NPLs and bankruptcies 
are  low  and  activity  and  investment  steady.  The  NFC  debt-to-GDP  ratio  remained  broadly 
unchanged at around 115.5% in 2024. For this year and next, slight deleveraging is expected. 
Credit growth increased to 5.8% in 2024. The interest coverage ratio, which is one of the lowest 
in  the  EU,  decreased  further  in  2024.  Savings  remained  low,  further  weighing  on  the  debt 
service  capacity  of  NFCs.  Nevertheless,  activity  and  profitability  indicators  started  to  improve 
throughout 2024.  

•  While  having  dropped  by  nearly  a  third  over  a  four-year  period,  the  household  debt  ratio 
remains high at 86% of GDP and 135% of GHDI, among the highest in the EU. Net credit flows 
are expected to accelerate in 2025 while deleveraging is forecast to continue due to strong real 
GDP  growth,  before  the  debt  ratio  picks  up  in  2026.  The  household  saving  rate  is  high,  and 
significantly  above  its  2019  level,  reflecting  particularly  an  increase  in  financial  savings  since 
2023,  as  investment  in  homes  remains  somewhat  below  its  pre-pandemic  level  (as  a  %  of 
GHDI). Household savings in Denmark have been on a longer-term upward trend over the last 

37 

3. Country sections 

two  decades,  supported  by  strong  growth  in  assets  and  asset  income,  and  more  prudent 
borrowing behaviour. 

•  House  prices  rose  by  3.5%  in  2024,  and  have  shown  some  acceleration  in  the  first  half  of 
2025, notably in the Copenhagen area. The price-to-income ratio was 4 pps. above its long-term 
average, suggesting house prices are slightly elevated relative to income. Overvaluation stood at 
11%.  Building  permits  were  low  (418  m²  per  1000  persons),  indicating  potential  supply 
constraints  (27).  The  recent  evolution  in  house  prices  has  been  supported  by  the  decrease  in 
interest rates combined with rising incomes that led to a 9.2% increase in borrowing capacity in 
2024. 

•  Government  debt  is  low  and  is  declining  further.  It  stood  at  30.5%  of  GDP  in  2024  and  is 
forecast to recede further in 2025 and 2026. The budget balance is clearly in surplus: it came to 
4.5% of GDP in 2024, with smaller surpluses being  forecast  for this year and next. Since late 
2024, yields on long-term Danish government bonds have been among the lowest in the EU and 
below the best rated sovereign debt of the euro area. 

•  The financial sector is sound as the banks are well capitalised, and the non-performing loans 
ratio is low. Profitability remained high in 2024 and is close to the EU median. Credit growth has 
been moderate but steady. The banking sector maintains strong exposure to real estate, which 
coupled with high household indebtedness still represents a risk for the financial sector.   

Graph 3.4: Selected graphs, Denmark 

Source: Eurostat, ECB and European Commission calculations. 

(27)  EU last decade average stands at around 450 m² per 1000 persons. 

38 

12233445566-10-50510151516171819202122232425%%a) Housing marketHouse price (y-o-y growth rate, lhs)Loans for house purchase (y-o-y growth rate, lhs)Interest rate (rhs)0501001502002503003501112131415161718192021222324% of GDPb) Decomposition of debt by sectorGovernmentHouseholds (+NPISH)Non-financial corporationsPrivate sector     
 
 
Table 3.4:  Key economic and financial indicators, Denmark 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

39 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)2.21.60.63.52.02.1Real GDP per capita (1 year % change)1.71.2-0.13.01.61.7GDP deflator (1 year % change)0.95.3-2.11.51.41.3Harmonised index of consumer prices (1 year % change)0.83.53.41.31.91.0Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)0.61.94.61.31.61.6External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%7.17.910.311.511.712.0Current account balance, balance of payments (% of GDP)0.8 (1)-1.4 (2)7.09.011.012.212.011.9of which: trade balance (% GDP)5.97.19.010.2of which: income balance (% GDP)1.11.92.02.0Net international investment position (% of GDP)-35%-99.5 (3)20.0 (4)59.356.240.369.078.386.9NENDI - NIIP excluding non-defaultable instruments (% of GDP)17.428.736.836.6Net lending-borrowing (% of GDP)7.09.110.711.8CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)1.46.29.511.67.75.5Nominal unit labour cost index per hour worked (1 year % change)0.83.03.51.52.51.4Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)0.2-0.5-1.0-0.9-4.5-3.7Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)-0.1-0.41.8-0.8-1.0-1.2Export performance against advanced economies (3y % change)-3%0.510.63.98.96.07.5Export performance against advanced economies (1 year % change)1.14.2-1.74.92.0-0.2Core inflation differential vis-à-vis the euro area (pps.)-0.4-0.1-0.4-1.6-0.9-0.5CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%89.2 (5)77.7 (6)109.9105.2113.7115.5114.1113.0NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%2.75.64.15.82.82.9Households and housing marketHousehold debt, consolidated (% of GDP)+55%61.4 (5)79.0 (6)112.399.988.485.885.084.4Household debt, consolidated (% of GHDI)171.1158.4137.3134.8Household credit flow, consolidated (% debt stock t-1)+14%1.11.70.30.62.62.7House price index, nominal (1 year % change)+9%3.96.8-3.83.57.05.0House prices over/undervaluation gap (7)5.815.89.910.6Standardized price-to-income ratio102.2111.0103.9104.2Building permits (m2 per 1000 inh)684.7699.5403.5418.3GovernmentGeneral government gross debt (% of GDP)60%39.039.433.030.528.927.7General government balance (% of GDP)2.32.63.44.52.31.1Banking sectorReturn on equity of banks (%)9.25.511.712.6Tier-1 capital ratio banking sector (% risk-weighted assets)19.820.321.020.5Gross non-performing loans, domestic and foreign entities (% gross loans)2.21.71.31.31.3Cost of borrowing for households for house purchase (%)2.12.25.24.63.8Cost of borrowing for NFCs (%)1.01.24.44.43.3Labour marketUnemployment rate (% labour force Y15-74)+10%4.8 (8)5.35.15.16.26.16.1Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp1.41.31.82.82.52.0           forecast 
      
 
3. Country sections 

GERMANY 

The current account surplus remains elevated, reflecting persistently weak domestic demand, but is 
on  a  decreasing  trend  due  to  a  significant  worsening  of  export  performance.  Productivity  has 
stagnated and competitiveness indicators are mixed, with ULC growth slightly above the euro area 
average  but  the  REER  appreciation  in  line  with  the  euro  area  average  in  2024.  House  prices 
decreased slightly in 2024 but there are signs of housing supply constraints.   

Real GDP contracted by 0.5% in 2024 and is forecast to broadly stagnate in 2025 before growing 
by 1.2% in 2026. Headline inflation decreased to 2.5% in 2024 and is expected to stand at 2.3% in 
2025. Core inflation eased to 3.2% in 2024 and has remained slightly above the euro area average 
also in 2025. The unemployment rate stood at 3.4% in 2024 and is expected to increase to 3.6% in 
2025.  

The  scoreboard  reading  for  Germany  shows  that  three  indicators  were  beyond  their  indicative 
thresholds in 2024, namely export performance against advanced economies, nominal unit labour 
costs, and general government debt. Relevant developments worth highlighting: 

•  External sustainability indicators highlight the persistent current account surplus. The three-
year average of the current account balance decreased to 5% of GDP in 2024, remaining below 
the  indicative  threshold  of  6%  and  the  higher  levels  recorded  in  the  last  decade.  The  surplus 
continues to exceed what can be explained by economic fundamentals. It mainly reflects weak 
domestic  demand,  which  continued  to  broadly  stagnate  at  pre-pandemic  levels  in  real  terms 
(1.3%  growth  since  2019  excluding  inventories).  The  private  sector  is  the  main  driver,  as 
household savings continue to exceed pre-pandemic levels and corporations also increased their 
net  savings,  reflecting  stagnant  investment  and  a  persistent  decline  of  capital  intensity.  As  a 
result of the continued external surplus, the NIIP increased further to ca. 80% of GDP in 2024, 
and is expected to remain among the largest worldwide in absolute terms.  

•  Competitiveness is marked by export underperformance. In 2024 and in the first half of 2025, 
headline inflation stayed broadly in line with that in the euro area, but core inflation consistently 
exceeded the euro area average by around ½ pp., owing to sticky services inflation.  Since last 
year, the REER appreciated, as the negative inflation differential was offset by  an appreciating 
euro. On the back of stagnating productivity and robust nominal wage growth, ULC continued to 
grow  slightly  above  the  euro  area  average,  with  an  increase  of  close  to  6%  in  2024,  as  real 
wages closed in on their pre-pandemic levels, and a 3-year change of 17.9%. At the same time, 
Germany has suffered a significant loss of export market share (one of the highest in the EU) 
compared to advanced economies over the last 3 years. 

•  An uncertain outlook and limited economic recovery characterise the non-financial corporate 
sector.  Its  debt-to-GDP  ratio  decreased  slightly  to  58.9%  of  GDP,  while  credit  growth  fell  to 
1.4% and deleveraging is expected to continue in 2025. Bank loan flows to NFCs have remained 
subdued, making Germany one of the few countries without a recovery by early 2025. The debt 
service  capacity  weakened  with  both  the  interest  coverage  ratio  (ICR)  and  corporate  savings 
decreasing compared to 2023. Despite this decline, Germany’s ICR remains high relative to other 
countries  and  by  historical  standards.  Financing  conditions  have  started  to  ease  as  borrowing 
costs  decreased  throughout  2024.  Sentiment  remains  weak  and  the  profit  share  fell  further. 
Bankruptcies and the share of NPLs increased, while new business registrations recovered only 
modestly. Real investment growth has been negative since the end of 2022.  

•  The  household  debt  ratio  continued  to  decrease  in  2024  and  fell  to  50%  of  GDP  (64%  of 
GHDI)  in  2024.  Net  credit  flows  remained  close  to  zero  but  are  expected  to  recover  going 

40 

3. Country sections 

forward, slowing down further deleveraging. At 20%, the gross saving rate is among the highest 
in  the  EU  and  stands  at  more  than  2  pps.  above  its  2019  level.  Real  consumption  has  been 
virtually flat since 2022 while real disposable income grew by 1.4%. 

•  House  prices  decreased  by  1.5%  in  2024,  despite  increasing  nominal  income,  but  are 
increasing moderately in the first half of 2025. The price-to-income ratio was 2 pps. below the 
long-term  average,  supporting  the  assessment  of  house  prices  being  broadly  in  line  with 
fundamentals.  Building  permits  fell  further  to  241  m²  per  1000  persons,  indicating  potential 
supply constraints  (28). House prices started to recover in early 2025, supported by decreasing 
interest rates combined with rising incomes that led to a 7.5% increase in borrowing capacity in 
2024. 

•  Government debt remains moderate but is forecast to increase. Government debt declined to 
62.2%  of  GDP  in  2024.  The  budget  deficit  stood  at  2.7%  of  GDP  in  2024  and  is  forecast  to 
increase  to  3.1%  of  GDP  this  year  and  4%  of  GDP  in  2026,  driving  up  debt.  Those  increases 
reflect the government’s plans for higher public spending and tax relief. Government guarantees 
have been among the largest in the EU. Fiscal sustainability risks remain medium in the medium 
term (29). 

•  Financial  sector  vulnerabilities  remain  contained.  The  capital  ratio  and  notably  profitability, 
which improved in 2023 and was sustained in 2024, remain below the EU median. This is driven 
by structural factors such as a fragmented market and competitive pressures. Non-performing 
loans and bankruptcies increased in 2024, especially for NFCs. Stage 2 loans increased to one of 
the  highest  values  in  the  EU.  The  ongoing  adjustment  of  the  commercial  real  estate  market 
could  affect  banks  with  large  exposures  as  liquidity  strains  could  force  distressed  sales  and 
developer defaults.  

Graph 3.5: Selected graphs, Germany 

Source: Eurostat and European Commission forecasts and calculations. 

(28)  EU last decade average stands at around 450 m² per 1000 persons. 

(29)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

41 

-10-50510152122232425% of GDP*Data up to 2025-08b) Germany -CA 12M moving average, as % of GDPIncome balanceServices balanceOther goods balanceEnergy price impactEnergy bal in 2019 pricesCurrent account bal40608010012014016018020016171819202122232425fReal gross fixed cap. fomation as % of 2019 levela) Investment (GFCF) : DE compared to all other EA Member States (excl IE)DERoEA     
 
 
Table 3.5:  Key economic and financial indicators, Germany 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

42 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)1.60.5-0.9-0.50.21.2Real GDP per capita (1 year % change)1.50.4-1.8-0.80.11.2GDP deflator (1 year % change)1.83.66.73.13.02.7Harmonised index of consumer prices (1 year % change)1.74.06.02.52.32.2Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.32.35.13.22.82.5External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%8.36.75.45.05.34.8Current account balance, balance of payments (% of GDP)1.2 (1)-0.2 (2)8.15.75.55.84.63.8of which: trade balance (% GDP)6.24.43.93.8of which: income balance (% GDP)1.91.31.61.9Net international investment position (% of GDP)-35%-83.7 (3)33.7 (4)51.668.168.779.776.169.8NENDI - NIIP excluding non-defaultable instruments (% of GDP)47.354.253.262.8Net lending-borrowing (% of GDP)8.05.44.95.2CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)5.87.411.017.918.312.3Nominal unit labour cost index per hour worked (1 year % change)2.42.27.65.64.12.2Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)1.90.91.91.6-0.8-0.6Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.7-0.13.80.4-0.50.1Export performance against advanced economies (3y % change)-3%-1.7-3.2-7.9-9.3-2.0-5.8Export performance against advanced economies (1 year % change)-1.0-2.51.4-3.4-2.3-1.7Core inflation differential vis-à-vis the euro area (pps.)0.30.20.20.40.30.4CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%78.0 (5)76.4 (6)55.463.059.258.958.057.6NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%5.38.22.11.42.34.7Households and housing marketHousehold debt, consolidated (% of GDP)+55%51.3 (5)55.0 (6)52.054.850.649.749.048.5Household debt, consolidated (% of GHDI)69.370.966.063.6Household credit flow, consolidated (% debt stock t-1)+14%3.94.60.70.61.92.8House price index, nominal (1 year % change)+9%6.28.5-8.4-1.53.03.0House prices over/undervaluation gap (7)3.620.49.54.4Standardized price-to-income ratio103.3116.8103.297.6Building permits (m2 per 1000 inh)465.9490.2302.6240.7GovernmentGeneral government gross debt (% of GDP)60%61.266.862.362.263.565.2General government balance (% of GDP)1.5-3.2-2.5-2.7-3.1-4.0Banking sectorReturn on equity of banks (%)2.53.55.75.6Tier-1 capital ratio banking sector (% risk-weighted assets)16.316.617.718.4Gross non-performing loans, domestic and foreign entities (% gross loans)1.51.11.31.51.5Cost of borrowing for households for house purchase (%)1.71.74.03.83.7Cost of borrowing for NFCs (%)1.61.84.95.23.9Labour marketUnemployment rate (% labour force Y15-74)+10%3.2 (8)3.23.43.13.43.63.5Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp1.10.92.31.5           forecast 
      
 
3. Country sections 

ESTONIA 

Cost  competitiveness  continues  to  worsen  while  economic  activity  remains  weak,  leading  to 
increased macroeconomic risks. Core inflation has remained elevated and the inflation differentials 
vis-à-vis  the  euro  area  have  widened  recently.  Unit  labour  costs  have  continued  to  increase 
significantly due to increases in nominal wages, adding to the increases recorded in previous years, 
and  export  performance  has  worsened.  House  prices  continue  to  grow,  with  some  signs  of 
overvaluation. 

Real GDP stagnated in 2024 (-0.1%) but is forecast to grow by 0.6% in 2025 and 2.1% in 2026. 
Headline  inflation  decreased  to  3.7%  in  2024  but  has  increased  and  is  set  to  stand  at  4.8%  in 
2025. While core inflation decreased to 5.1% in 2024, it is forecast to rise to 6.0% in 2025 with 
about half of it attributed to tax increases. Hence, the core inflation differential  against the euro 
area, which narrowed to 2.3 pps. in 2024, would stand at 3.5 pps. in 2025. The unemployment rate 
stood at 7.6% in 2024 and is expected to remain stable in 2025.  

The  scoreboard  reading  for  Estonia  shows  that  three  indicators  were  beyond  their  indicative 
thresholds in 2024, namely the real effective exchange rate, export performance, and nominal unit 
labour costs. Relevant developments worth highlighting:  

•  External sector developments remained stable. The current account deficit remained at 1.2% 
of GDP in 2024; however, as economic activity was sluggish, the underlying cyclically-adjusted 
deficit  appears to  be  considerably  wider.  The  current  account is  expected to widen  somewhat. 
The NIIP increased markedly in 2024, to around -10% of GDP, mostly due to valuation effects. 
The NENDI, which excludes non-defaultable instruments from the NIIP, was positive in 2024.  

•  Competitiveness  concerns  persist.  Both  headline  and core inflation differentials vis-à-vis the 
euro area remained positive in 2024. They have increased by mid-2025 and are now the highest 
in the euro area, mainly due to services inflation picking up,  partly due to increases in indirect 
taxes. The REER appreciated moderately in 2024, on account of both higher domestic inflation 
and NEER appreciation, but gained 16% over 3 years, and continued to strengthen over the first 
half of 2025. Last year, nominal wage increases remained high despite some moderation, and, 
along with drops in productivity, pushed ULC to rise by over 7%, with a 3-year growth of over 
40%. In 2025, ULC growth has eased somewhat. Real wages remained below their 2019 levels 
in 2024. Export market share relative to advanced economies have fallen by some 4% over the 
three years up to 2024.  

•  High costs of borrowing, and subdued investment have strained the non-financial corporate 
sector  despite  low  indebtedness.  The  NFC  debt-to-GDP  ratio  increased  to  58.3%  and  is 
expected to stay close to 59% in the near future. Credit growth rose to 9.2% in 2024, among 
the highest in the EU, and is expected to  remain strong as bank loan flows to NFCs increased 
strongly in the first half of 2025. The share of NPLs increased somewhat in 2024 but was still 
among  the  lowest  in  the  EU.  Sentiment  has  remained  weak  and  debt  service  capacity 
deteriorated  further  as  the  costs  of  borrowing  increased  compared  to  2023.  The  interest 
coverage  ratio  fell  further  as  interest  expenses  rose  and  gross  operating  surplus  continued to 
decline. However, the gross operating surplus started to mildly increase in 2025, which, together 
with  falling  borrowing  costs,  suggests  an  improvement  in  the  debt  service  ability  in  the  near 
future. Unit profits remained broadly stable in 2024. Investment has been weak despite strong 
credit growth.  

•  The  household  debt  ratio  is  moderate  (at  38%  of  GDP  and  55%  of  GHDI  in  2024)  but 
increasing on the back of dynamic credit growth (8% of last year’s debt stock in 2024). The debt 

43 

3. Country sections 

ratio  is  expected  to  continue  increasing  in  2025.  Consumption  growth  outpaced  disposable 
income growth and led to a collapse in the gross saving rate in 2022. By 2024, it has partially 
recovered to 7% of GHDI, still below its pre-pandemic level of 10%. This is reflected particularly 
in  a  drop  in  financial  savings (30),  as  mortgage  lending  and  investment  in  dwellings  remained 
relatively dynamic. On the positive side, while having declined recently, households’ net financial 
asset position remains above its pre-pandemic level, both as a  proportion  of GHDI and in real 
terms. 

•  House  prices  rose  by  6.1%  in  2024,  following  a  5.9%  increase  in  2023.  In  the  first  half  of 
2025,  house  price  growth  slightly  moderated.  The  price-to-income  ratio  was  3  pps.  above  its 
long-term  average  in  2024,  suggesting  house  prices  are  elevated  relative  to  income. 
Overvaluation  stood  at  9%.  Building  permits  were  low  (364  m²  per  1000  persons),  indicating 
potential supply constraints (31). The recent evolution in house prices has been supported by the 
decrease  in  interest  rates  combined  with  rising  incomes  that  led  to  a  7.5%  increase  in  the 
borrowing capacity in 2024. 

•  Government debt is low despite recent increases. It came in at 23.5% of GDP in 2024, which is 
over 14 pps. above its pre-COVID-19 level. It is forecast to stay essentially unchanged in 2025 
but  to  edge  up  again  in  2026.  The  fiscal  deficit  narrowed  to  1.7%  of  GDP  in  2024  and  is 
expected to decline somewhat this year before worsening next year.  

•  The  financial  sector  remains  resilient.  Banks  display  a  very  low  non-performing  loan  ratio, 
while  capital  ratios and profitability  remain above the EU  median despite recent decline. Loan 
growth has been among the fastest in the euro area despite relatively high bank lending rates. 
Large exposure of the banking sector to real estate represents a risk.  

Graph 3.6: Selected graphs, Estonia 

Source: Eurostat and European Commission forecasts and calculations. 

(30)  The  financial  saving  rate  is  negative  according  to  the  non-financial  accounts,  but  positive  according  to  the  financial 

accounts.  

(31)  EU last decade average stands at around 450 m² per 1000 persons. 

44 

-6-4-20246810101112131415161718192021222324Pps.a) HICP/CPI-based REER, 42 part.ΔNEERΔInfl.REER-15-551525141516171819202122232425f26fPpsb) Decomposition of rate of change of ULC Inflation (HICP)Real Compensation/hr.Productivity/hr. (neg. contrib.)ULCULC in EU27      
 
 
Table 3.6:  Key economic and financial indicators, Estonia 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

45 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)4.31.3-2.7-0.10.62.1Real GDP per capita (1 year % change)4.11.1-5.2-0.70.82.4GDP deflator (1 year % change)4.17.18.64.04.04.3Harmonised index of consumer prices (1 year % change)3.17.49.13.74.82.8Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)2.04.38.75.16.03.9External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%1.3-1.5-2.7-1.9-1.3-1.7Current account balance, balance of payments (% of GDP)-1.7 (1)-0.6 (2)1.4-3.1-1.2-1.2-1.4-2.4of which: trade balance (% GDP)3.1-1.11.00.3of which: income balance (% GDP)-1.7-2.0-2.2-1.5Net international investment position (% of GDP)-35%-56.8 (3)-17.1 (4)-28.1-19.0-19.4-9.7-9.5-8.7NENDI - NIIP excluding non-defaultable instruments (% of GDP)24.436.630.728.3Net lending-borrowing (% of GDP)2.80.7-0.10.4CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)14.816.232.440.429.315.6Nominal unit labour cost index per hour worked (1 year % change)5.36.415.17.44.62.9Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)5.65.115.716.06.74.0Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)1.92.87.11.61.90.8Export performance against advanced economies (3y % change)-3%2.915.68.1-4.3-1.34.5Export performance against advanced economies (1 year % change)1.85.7-4.1-1.32.81.5Core inflation differential vis-à-vis the euro area (pps.)1.02.33.82.33.51.7CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%138.5 (5)61.7 (6)61.958.154.358.359.259.0NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%1.16.03.09.27.77.5Households and housing marketHousehold debt, consolidated (% of GDP)+55%128.0 (5)39.9 (6)37.938.136.738.139.841.1Household debt, consolidated (% of GHDI)58.157.154.554.5Household credit flow, consolidated (% debt stock t-1)+14%7.37.66.38.09.49.9House price index, nominal (1 year % change)+9%6.114.25.96.1House prices over/undervaluation gap (7)-10.20.57.69.4Standardized price-to-income ratio89.998.1104.4103.4Building permits (m2 per 1000 inh)505.1551.3366.1363.7GovernmentGeneral government gross debt (% of GDP)60%9.018.920.223.523.425.9General government balance (% of GDP)-0.4-3.0-2.7-1.7-1.3-4.4Banking sectorReturn on equity of banks (%)9.19.318.516.4Tier-1 capital ratio banking sector (% risk-weighted assets)28.824.021.419.3Gross non-performing loans, domestic and foreign entities (% gross loans)1.61.21.11.21.4Cost of borrowing for households for house purchase (%)2.52.55.65.54.1Cost of borrowing for NFCs (%)2.83.06.36.65.0Labour marketUnemployment rate (% labour force Y15-74)+10%7.0 (8)5.26.26.47.67.57.1Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp2.30.72.03.10.80.2           forecast 
          
 
3. Country sections 

IRELAND 

External  and  private  debt  ratios  remain  high  but  related  macroeconomic  risks  seem  limited. 
External sector data and private debt ratios in Ireland are affected by the statistical impact of the 
extensive operations of multinational corporations. The current account surplus increased and the 
negative NIIP continued to improve in 2024. Inflationary pressures have remained contained, which 
has supported competitiveness, and Ireland has recorded export market share gains. Non-financial 
corporations debt ratios decreased while remaining elevated.  

Real GDP growth rebounded to 2.6% in 2024 and is forecast to increase to 10.7% in 2025 before 
decreasing to 0.2% in 2026. Headline inflation decreased to 1.3% in 2024 and is set to stand at 
1.9% in 2025. Core inflation decreased to 2.3% in 2024. It has decreased slightly further and is set 
to stand at 1.9% in 2025, hence remaining below the euro area average. The unemployment rate 
stood at 4.3% in 2024 and is expected to increase to 4.6% in 2025.  

The  scoreboard  reading  for  Ireland  shows  that  four  indicators  were  beyond  their  indicative 
thresholds in 2024, namely the current account surplus, the net international investment position, 
nominal  unit  labour  costs,  and  non-financial  corporations  debt.  Relevant  developments  worth 
highlighting: 

•  External  sustainability  continues  to  strengthen,  but  external  sector  data  are  inflated  and 
volatile  due  to  the  impact  of  the  activities  of  multinational  enterprises  (MNEs)  in  Ireland.  The 
current account surplus increased from 7.0% of GDP in 2023 to 16.2% in 2024, mainly due to 
higher service exports, including a large one-off service export from MNEs. The current account 
surplus is forecast to remain high in 2025 and 2026. The net international investment position 
(NIIP) narrowed further, from -103.3% of GDP in 2023 to -81.4% in 2024. A further narrowing 
in  this  position  is  expected  in  the  coming  years,  mainly  due  to  the  continued  current  account 
surpluses.  

•  Competitiveness indicators reflect inflationary pressures below those in the euro area in both 
2024 and 2025. ULC evolved broadly in line with those in the single currency area in 2024 (with 
a  3-year  change  of  20.6%)  and  are  expected  to  post  figures  below  them  in  2025.  The  REER 
marginally depreciated last year and in early 2025, but following the euro’s appreciation relative 
to  the  dollar  in  April,  it  gained  some  2%.  Ireland’s  export  performance  against  advanced 
economies  has  increased,  but  movements  largely  reflect  the  activities  of  very  large 
multinational enterprises in the country. 

•  High  leverage  continues  to  be  the  main  weakness  of  the  non-financial  corporate  sector 
together with a high share of short-term debt. Deleveraging continued and the NFC debt-to-GDP 
ratio decreased to 90.9% in 2024 supported  by nominal GDP growth and active deleveraging. 
Credit  growth,  defined  as  credit  flows excl.  FDI  divided  by the  debt  stock in  the  previous  year 
excl.  FDI,  declined  to  -0.8%  and  bank  loan  flows  to  NFCs  have  remained  subdued.  Further 
deleveraging  is  expected  in  the  next  years.  The  interest  coverage  ratio  increased  in  2024  as 
interest  expenses  have  come  down  since  2023-Q2  and  gross  operating  surplus  increased 
strongly in the second half of 2024. The share of NPLs decreased further in 2024. However, the 
share of short-term to long-term debt has been above its long-term average.  

•  The  household  debt  ratio  is  relatively  low  when  expressed  as  a  share  of  GDP  (24%),  but  it 
remains moderate to high, at around 61%, when expressed as a share of GHDI. Net credit flows 
increased in 2024 following a contraction when interest rates increased. The gross saving rate is 
in  line  with  its  pre-pandemic  level,  but  investment  in  homes  has  recently  strengthened 
significantly at the expense of financial saving. 

46 

3. Country sections 

•  House prices rose by 8.5% in 2024 and continued to increase at a similar pace in the first half 
of 2025. In 2024, the price-to-income ratio was 3 pps. below the long-term average, but it takes 
12.5 years of income to buy a 100m² apartment on average, while the long-term EU average is 
8  years.  Low  affordability  has  been  driven  by  lack  of  supply  and  increased  immigration.  New 
housing units built in 2024 remain high at 5.6 per 1000 persons, reflecting some dynamism of 
housing supply. Despite some increase in interest rates, the recent evolution in house prices has 
been supported by the increase in incomes that led to a 4.4% increase in borrowing capacity in 
2024.  

•  Government debt remains limited as share of GDP and is declining further. Government debt 
fell to 38.3% of GDP in 2024, which is some 18 pps. below its pre-COVID-19 level. It is forecast 
to fall further this year and next. The government balance has been in surplus since 2022, and it 
came  at  4%  of  GDP  in  2024.  That  has  been  largely  due  to  high  corporate  taxation  revenues, 
with much of them paid by relatively few large foreign-owned multinational enterprises and a 
large  portion  of  those  revenues  is  estimated  to  be  windfall,  i.e.  beyond  what  is  explained  by 
underlying domestic economic activity. The budgetary surplus is expected to recede visibly this 
year and next.  

•  The resilience of the large financial sector is underpinned by a well-capitalised banking sector. 
The  profitability  of  banks  (both  domestic  retail  banks  and  international  investment  ones) 
increased  further  in  2024  but  remains  below  the  EU  median.  The  non-performing  loans  ratio 
remains  low  and  declined  slightly  in  2024.  The  stage  2  ratio  is  rather  high,  and  linked  to 
vulnerabilities in some NFC segments such as commercial real estate, but it remained stable in 
2024.  Loan  growth  was  rather  dynamic  in  2024,  especially  towards  households,  but  has 
decelerated somewhat in 2025 as interest rates for corporations rise. 

Graph 3.7: Selected graphs, Ireland 

Source: Eurostat, ECB and European Commission forecasts and calculations. 

47 

01020304050600100200300400500600081012141618202224f% of GDP2015=100b) Residential Investment and Building Permits -IrelandResidential Building Permits - number (2015=100)Residential Building Permits - m2 (2015=100)Residential Investment (% of GDP, right axis)020406080100120140160-10-5051015202517192123252020 = 100Rate of change y-o-y (%)a) Evolution of House Price Index and MFI Loans for House Purchase -IrelandMFI loans for house purchase (y-o-y growth rate)Nominal House Price Index (2020=100), right axisReal House Price Index (2020=100), right axis     
 
Table 3.7:  Key economic and financial indicators, Ireland 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

48 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)7.610.3-2.52.610.70.2Real GDP per capita (1 year % change)6.08.5-4.30.99.1-0.8GDP deflator (1 year % change)1.92.23.44.52.12.0Harmonised index of consumer prices (1 year % change)0.63.35.21.31.91.9Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)0.52.04.42.31.91.9External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%-0.6-2.89.310.711.011.2Current account balance, balance of payments (% of GDP)3.6 (1)7.0 (2)-5.14.67.016.29.77.8of which: trade balance (% GDP)19.334.633.441.8of which: income balance (% GDP)-24.4-30.0-26.4-25.6Net international investment position (% of GDP)-35%-147.3 (3)27.9 (4)-180.2-130.2-103.3-81.4-51.7-47.4NENDI - NIIP excluding non-defaultable instruments (% of GDP)-260.9-274.3-269.7-332.1Net lending-borrowing (% of GDP)-16.33.65.415.7CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)-6.3-10.29.920.612.44.0Nominal unit labour cost index per hour worked (1 year % change)-1.2-3.713.14.3-4.74.6Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)-1.6-2.7-1.3-1.8-2.3-2.1Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)-0.4-1.53.7-0.7-0.6-0.2Export performance against advanced economies (3y % change)-3%23.529.4-7.65.210.611.4Export performance against advanced economies (1 year % change)4.95.20.610.41.31.3Core inflation differential vis-à-vis the euro area (pps.)-0.50.0-0.5-0.6-0.5-0.2CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%82.0 (5)94.3 (6)195.8135.3110.790.978.377.9NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%-5.4-1.428.9-0.8-4.62.7Households and housing marketHousehold debt, consolidated (% of GDP)+55%49.6 (5)76.5 (6)44.729.325.623.821.421.6Household debt, consolidated (% of GHDI)106.277.166.260.8Household credit flow, consolidated (% debt stock t-1)+14%-1.5-0.51.11.81.82.7House price index, nominal (1 year % change)+9%7.76.83.18.56.04.0House prices over/undervaluation gap (7)-5.8-5.7-6.8-5.3Standardized price-to-income ratio96.797.095.897.4Building permits (m2 per 1000 inh)816.1901.2868.6742.8GovernmentGeneral government gross debt (% of GDP)60%60.850.741.838.333.132.5General government balance (% of GDP)0.1-1.51.44.01.51.0Banking sectorReturn on equity of banks (%)4.51.97.69.2Tier-1 capital ratio banking sector (% risk-weighted assets)23.323.021.821.5Gross non-performing loans, domestic and foreign entities (% gross loans)6.32.51.31.11.1Cost of borrowing for households for house purchase (%)3.02.83.84.03.6Cost of borrowing for NFCs (%)2.93.05.65.75.1Labour marketUnemployment rate (% labour force Y15-74)+10%4.4 (8)5.85.54.34.34.64.7Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp0.71.26.73.31.91.7           forecast 
      
 
3. Country sections 

GREECE 

While  remaining  elevated,  external  and  government  debt  levels  have  continued  to  decrease, 
alleviating  the  related  vulnerabilities.  The  current  account  deficit  widened  slightly  in  2024,  partly 
due  to  the  import  content  of  investment.  The  net  international  investment  position  remains  very 
negative despite its significant increase. The government debt-to-GDP ratio continued to decrease, 
with  the  government  primary  balance  recording  a  significant  surplus  in  2024.  The  share  of  non-
performing loans has continued to decrease. House prices have increased further and show signs of 
overvaluation.  

Real GDP growth was unchanged at 2.1 % in 2024 and is forecast to remain stable in 2025 and to 
reach  2.2%  in  2026.  Headline  and  core  inflation  decreased  in  2024  (to  3.0%  and  3.6% 
respectively).  They  have  remained  broadly  stable in  2025 (with  headline  inflation  set to  stand  at 
2.8% and core inflation at 3.5%). The core inflation differential against the euro area, which stood 
at  0.7  pps. in  2024,  has widened  somewhat  in  2025.  The  unemployment  rate  stood  at  10.1%  in 
2024 and is expected to decrease to 9.3% in 2025.  

The  scoreboard  reading  for  Greece  shows  that  five  indicators  were  beyond  their  indicative 
thresholds in  2024,  namely  the  current  account  deficit, the  net international  investment  position, 
house  prices,  government  debt,  and  the  unemployment  rate.  Relevant  developments  worth 
highlighting: 

•  External sustainability concerns remain. The current account balance remained sizeable, well 
above  its  pre-2020  levels  as  well  as  above  levels  explained  by  economic  fundamentals.  The 
deficit widened slightly to 7.2% in 2024. Continued robust investment activity contributed to the 
widening  of  the  deficit,  while  price  effects  partly  mitigated  this  effect  in  2024.  The  current 
account deficit is forecast to somewhat reduce but remain elevated. Grants and loans from the 
EU will help cover part of external financing needs, although the capital account was balanced in 
2024,  after  many  years  of  positive  capital  transfer  inflows.  The  net  international  investment 
position  increased  substantially  in  2024  but  remained  very  negative,  at  -137.5%  of  GDP.  The 
combination  of  substantial  net  external  borrowing  and  an  expected  deceleration  in  nominal 
growth will constrain its further improvement. 

•  Competitiveness indicators remain stable despite an uptick in inflation. Both headline and core 
inflation  differentials vis-à-vis the  euro  area increased  lately,  owing to  contributions  from the 
services component, and are expected to stay positive over 2025. Last year, the REER remained 
virtually  unchanged  as  the  nominal  appreciation  of  the  euro  was  almost  completely  offset  by 
favourable  inflation  differentials  with  main  trading  partners.  It  started  to  appreciate  in  2025, 
particularly after April. In 2024, ULC growth evolved in line with the euro area average and it is 
expected  to  come  in  slightly  higher  in  2025.  Following  years  of  improvement  in  the  labour 
market,  the  unemployment  rate  is  expected  to  drop  below  the  10%  scoreboard  threshold  in 
2025.  Although  the  3-year  change  in  export  market  share  boasts  strong  gains,  the  annual 
change for 2024 indicated a marginal decline. 

•  The  non-financial  corporate  sector  appears  robust,  with  strong  borrowing  and  investment, 
accompanied  by  a  continuing  decline  in  the  share  of  non-performing  loans  (NPLs).  After  two 
years of deleveraging, the NFC debt-to-GDP ratio increased in 2024 to 55.5% and is expected to 
stay broadly at this level over the next two years. Credit growth was strong at 10.4% in 2024 
(the  highest  in  the  EU)  and  bank  loan  flows  have  continued  rising  in  the  first  half  of  2025, 
suggesting  that  borrowing  will  remain  robust.  The  share  of  NFC  NPLs  continued  to  fall.  The 
change in unit profit fell in 2023 and 2024, and turned negative in the beginning of 2025. Real 
investment growth was lower in 2024 than in 2023, but still among the highest across the EU.  

49 

3. Country sections 

•  The  household  debt  ratio  is  moderate  at  39%  of  GDP  (51%  GHDI)  and  has  come  down 
significantly  over  the  last  two  decades  on  the  back  of  consistently  negative  net  credit  flows, 
supported  in  recent  years  by  strong  nominal  GDP  growth.  In  2024,  net  credit  flows  turned 
marginally  positive  for  the  first  time  since  2010,  helped  by  a  public  loan  subsidy  program. 
Deleveraging is expected to continue, albeit at a lower speed, over the next years. Households’ 
gross  saving  rate  remains  negative  at  -2.5%  and  among  the  lowest  in  the  EU (32),  with  little 
prospect of substantially improving. Household investment in dwellings remains weak, at around 
6%  of  GHDI,  but  has  been  on  an  upward  trend  since  2018.  Fixed  capital  consumption  has 
exceeded  fixed  capital  investment  since  2012,  but  the  gap  is  declining.  Non-performing  loans 
still  represent  7%  of  overall  bank  loans  to  households  in  Greece.  This  proportion  continues  to 
decrease, but at a clearly decelerating speed. 

•  House prices increased by  9% in 2024. The price-to-income ratio was 8 pps. above its long-
term average, suggesting house prices are high relative to income. Overvaluation stood at 22%. 
Building  permits  were 
indicating  potential  supply 
constraints (33).  The  recent  evolution  in  house  prices  has  been  supported  by  the  increase  in 
incomes that led to an 8.2% increase in borrowing capacity in 2024. 

low  (342  m²  per  1000  persons), 

•  Government debt is high but is clearly  declining. Government debt  fell to 154.2% of GDP in 
2024,  some  29  pps.  below  its  pre-COVID-19  level.  It  remains  the  highest  in  the  EU,  and  is 
forecast to fall further this year and the next. The government balance has been improving and 
a surplus of 1.2% of GDP was recorded in 2024, with the primary surplus alone being at 4.7% 
of  GDP.  Smaller  surpluses  are  forecast  in  2025  and  2026.  As  Greece’s  government  debt  is 
predominantly  held  by  official  lenders  at  favourable  rates  and  long  maturities,  interest 
expenditure growth has been contained, and gross financing needs are limited and edging down. 
Spreads on Greek long-term sovereign bonds compared with the best rated euro area sovereign 
debt have been receding further, staying at below 100 basis points since late 2024. The fiscal 
sustainability risks remain high in the medium term (34). 

•  The financial sector situation improved further, but some concerns remain. The capitalisation 
of  the  banking  sector  was  stable  in  2024  whereas  profitability  remained  strong,  but  both 
remained  below  the  EU  medians.  The  non-performing  loans  (NPL)  ratio  of  the  banking  sector 
further decreased, but at 3% it remained above the EU median. A large share of NPLs in Greece 
is held by servicers and their workout is rather slow; as a result, they still have the capacity to 
weigh on the economy. The share of Stage 2 loans has been gradually decreasing.  

(32)  Household statistics might be distorted by measurement issues, as data from the financial transactions accounts imply a 

positive gross savings ratio since 2019.  

(33)  EU last decade average stands at around 450 m² per 1000 persons. 

(34)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

50 

 
Graph 3.8: Selected graphs, Greece 

3. Country sections 

Source: Eurostat and European Commission forecasts and calculations. 

Table 3.8:  Key economic and financial indicators, Greece 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

51 

-30-20-100102020212223242525f26f% of GDPa) Decomposition of external position (current and capital accounts)DiscrepancyGoods, fcastServices, fcastGoods excl energyEnergy balanceServices excl travelTravel balancePrimary inc. bal.Current accountNet lending/borrowing-30-20-1001020304016171819202122232425Change in pp. of GDP (y-o-y)b) Decomposition of Rate of Change of NIIP  -GreeceValuation changesNet transaction effect (rest FA bal.)Investment income effectNominal growth effectChange in NIIP (y-o-y)averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)2.01.42.12.12.12.2Real GDP per capita (1 year % change)2.11.82.42.22.12.3GDP deflator (1 year % change)0.12.46.33.22.82.5Harmonised index of consumer prices (1 year % change)0.82.84.23.02.82.3Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)0.50.75.33.63.52.6External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%-1.9-5.5-8.1-8.2-6.7-6.5Current account balance, balance of payments (% of GDP)-1.7 (1)-0.2 (2)-2.1-7.9-6.8-7.2-6.0-6.2of which: trade balance (% GDP)-1.2-8.0-5.0-5.5of which: income balance (% GDP)-0.90.0-1.8-1.7Net international investment position (% of GDP)-35%-50.8 (3)-49.5 (4)-147.8-165.5-145.9-137.5-138.5-136.5NENDI - NIIP excluding non-defaultable instruments (% of GDP)-131.7-144.0-116.5-105.7Net lending-borrowing (% of GDP)-1.7-6.2-5.6-7.2CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)-3.44.70.37.612.012.4Nominal unit labour cost index per hour worked (1 year % change)-0.81.92.05.44.12.4Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)0.5-1.8-1.20.8-1.20.7Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.2-0.81.60.40.20.1Export performance against advanced economies (3y % change)-3%5.9-2.632.16.90.73.0Export performance against advanced economies (1 year % change)4.82.6-1.4-1.42.01.3Core inflation differential vis-à-vis the euro area (pps.)-0.5-1.30.40.71.10.5CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%57.1 (5)66.0 (6)59.061.753.155.556.156.6NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%0.47.04.610.46.36.1Households and housing marketHousehold debt, consolidated (% of GDP)+55%31.5 (5)35.6 (6)57.452.840.939.037.235.7Household debt, consolidated (% of GHDI)76.165.453.051.2Household credit flow, consolidated (% debt stock t-1)+14%-2.2-2.4-1.00.20.20.4House price index, nominal (1 year % change)+9%2.68.013.99.010.08.0House prices over/undervaluation gap (7)-9.72.817.422.0Standardized price-to-income ratio88.095.5102.8107.6Building permits (m2 per 1000 inh)83.9181.9256.0341.8GovernmentGeneral government gross debt (% of GDP)60%184.8194.8164.3154.2147.6142.1General government balance (% of GDP)0.8-6.5-1.41.21.10.3Banking sectorReturn on equity of banks (%)-0.3-5.112.011.7Tier-1 capital ratio banking sector (% risk-weighted assets)16.214.616.216.7Gross non-performing loans, domestic and foreign entities (% gross loans)40.713.85.03.03.0Cost of borrowing for households for house purchase (%)3.02.84.14.13.6Cost of borrowing for NFCs (%)4.23.35.95.64.3Labour marketUnemployment rate (% labour force Y15-74)+10%9.4 (8)19.814.911.110.19.38.6Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp0.5-0.94.23.2           forecast   
 
 
      
 
3. Country sections 

SPAIN 

External  sustainability  indicators  strengthened  further  in  2024.  Thanks  to  contained  inflationary 
pressures, Spain’s competitive position has remained steady, with ULC growth and core inflation in 
line with the euro area average. Spain’s current account surplus increased further in 2024 and its 
net international investment position improved. The unemployment rate, while remaining elevated, 
continued its downward trend in 2024. The government deficit narrowed in 2024, which, together 
with  strong  nominal  GDP growth,  led  to  a  further  decrease  of  the  still  high government  debt-to-
GDP ratio. 

Real GDP increased by 3.5% in 2024 and is forecast to grow by 2.9% in 2025 and 2.3% in 2026. 
Headline inflation decreased to 2.9% in 2024 and is set to stand at 2.6% in 2025. Core inflation 
moderated to 2.8% in 2024, and it is expected at 2.5% in 2025, almost in line with the euro area 
average.  The  unemployment  rate  continued  to  edge  down  in  2024  and  is  expected  to  reduce 
further in 2025, at 10.4%.  

The  scoreboard  reading  for  Spain  shows  that  four  indicators  were  beyond  their  indicative 
thresholds  in  2024,  namely  the  net  international  investment  position,  nominal  unit  labour  costs, 
government debt, and the unemployment rate. Relevant developments worth highlighting: 

•  External  sustainability  indicators  continue  to  strengthen,  with  a  current  account  surplus 
standing  at  3.2%  of  GDP  and  an  increasing  NIIP.  The  current  account  surplus  is  forecast  to 
remain  relatively  stable,  while  the  NIIP,  standing  at  -41%  of  GDP  in  2024,  is  expected  to 
increase further in 2025 and 2026, rising above the -35% scoreboard threshold.  

•  Competitiveness  challenges  remain  contained.  In  2024,  the  REER  appreciated  slightly,  as 
negative inflation differentials against trading partners partially offset the nominal appreciation 
of the euro, a trend that continued into mid-2025. In 2024, ULCs growth reached 3.5% slightly 
below the euro area figure, as nominal wage growth was partly offset by productivity gains. The 
3-year change in ULCs was 11.4%. The labour market has improved significantly in recent years 
and  the  unemployment  rate  has  decreased  markedly  thanks  to  significant  employment  gains, 
although it remains the highest in the EU.  

•  Despite  a  slight  deterioration  in  debt  service  capacity,  the  non-financial  corporate  sector 
remained robust. Deleveraging continued in 2024, with the debt-to-GDP ratio standing at 63.4% 
in 2024, level around which it is expected to stabilise over the next year or two. Credit growth 
turned positive, reaching 2.3% in 2024. The interest coverage ratio reached its lowest point in 
mid-2024 in line with the euro area aggregate and has since then started to slightly increase as 
interest expenses began to decline. The share of NPLs continued to decrease, but bankruptcies 
picked up partly related to the new legal framework for insolvencies, widening the gap with new 
business  registrations.  Profitability  indicators  continued  to  deteriorate  and  savings  decreased 
further.  

•  The  household  debt  ratio  is  moderate  at  44%  of  GDP  (58%  of  GHDI)  and  has  declined  by 
nearly  18  pps.  over  the  last  four  years  thanks  to  high  nominal  GDP  growth  and  subdued 
borrowing.  Net  credit  flows  turned  positive  again  in  the  second  half  of  2024  and  further 
accelerated  in  2025.  The  household  gross  saving  rate  remains  firmly  above  its  pre-pandemic 
level,  largely  due  to  a  pick-up  in  financial  saving,  although  non-financial  saving  has  slightly 
increased as well compared to 2019. The proportion of non-performing loans to households is 
plateauing at just below 4%, which is still a significant level. 

52 

3. Country sections 

•  House prices increased by 8.5% in 2024. In the first half of 2025, house prices are showing 
signs of  some  acceleration. The price-to-income ratio was  1 pp. below the long-term average, 
suggesting that house prices are still moderate relative to income. Overvaluation stood at 10%. 
Building permits were low, at 354 m² per 1000 persons, indicating potential supply constraints 
(35). The recent evolution in house prices has been supported by the decrease in interest rates 
combined with rising incomes, which led to a 10.3% increase in borrowing capacity in 2024.  

•  Government debt remains high but is decreasing. It fell to 101.6% of GDP in 2024, which is 
still  about  4  pps.  above  its  pre-COVID-19  level.  Government  debt  is  forecast  to  edge  down 
marginally in 2025 and 2026. The government deficit declined very marginally to 3.2% of GDP 
in 2024 and is forecast to narrow somewhat more visibly this year and the next. Gross financing 
needs are sizeable. In 2024 and 2025, spreads on Spanish long-term sovereign bonds compared 
to  the  highest-rated  euro  area  sovereign  debt  declined  somewhat.  Fiscal  sustainability  risks 
remain high in the medium term (36). 

•  The financial sector remained resilient in 2024. Profitability increased to record highs, despite 
the  ongoing  effect  of  the  temporary  banking  tax  introduced  in  2023.  Banking  capitalisation 
remained  stable,  yet  lower  compared  to  EU  peers.  The  non-performing  loans  ratio  further 
decreased in 2024, reaching a historical low, though  at 2.5% it remains slightly above the EU 
median.  The  ratio  of  Stage  2  loans  slightly  decreased  in  2024  and  remains  below  the  EU 
average. Bank lending remains resilient amid a buoyant economic outlook. 

Graph 3.9: Selected graphs, Spain 

Source: Eurostat and European Commission forecasts and calculations. 

(35)  EU last decade average stands at around 450 m² per 1000 persons. 

(36)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

53 

0501001502002503001112131415161718192021222324% of GDPb) Decomposition of debt by sectorGovernmentHouseholds (+NPISH)Non-financial corporationsPrivate sector-120-90-60-30030111213141516171819202122232425f% of GDPa) Decomposition of Net International Investment Position -SpainReserve assetsPortfolio inv, equityPortfolio inv, debtOther investmentDirect investmentFin derivatives and ESONIIPNENDI     
 
 
Table 3.9:  Key economic and financial indicators, Spain 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

54 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)2.40.42.53.52.92.3Real GDP per capita (1 year % change)1.9-0.11.32.41.71.2GDP deflator (1 year % change)1.32.86.22.92.52.1Harmonised index of consumer prices (1 year % change)1.53.63.42.92.62.0Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.11.64.12.82.52.0External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%2.51.21.32.12.92.9Current account balance, balance of payments (% of GDP)-0.1 (1)1.2 (2)2.30.72.73.22.72.7of which: trade balance (% GDP)3.11.13.84.2of which: income balance (% GDP)-0.9-0.5-1.1-1.0Net international investment position (% of GDP)-35%-61.4 (3)-16.8 (4)-78.1-69.7-49.3-41.0-36.3-31.0NENDI - NIIP excluding non-defaultable instruments (% of GDP)-51.6-39.9-23.3-16.6Net lending-borrowing (% of GDP)2.61.43.94.3CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)2.312.09.411.413.310.1Nominal unit labour cost index per hour worked (1 year % change)2.13.35.73.53.52.7Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)1.2-0.1-0.8-0.7-1.90.4Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.6-0.20.60.60.20.0Export performance against advanced economies (3y % change)-3%2.2-8.713.212.510.14.7Export performance against advanced economies (1 year % change)-0.2-1.45.91.81.30.1Core inflation differential vis-à-vis the euro area (pps.)0.1-0.4-0.80.00.1-0.1CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%54.8 (5)48.7 (6)78.482.466.063.461.961.5NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%0.72.8-2.92.33.74.9Households and housing marketHousehold debt, consolidated (% of GDP)+55%36.7 (5)44.2 (6)58.756.946.143.742.642.3Household debt, consolidated (% of GHDI)79.972.861.958.2Household credit flow, consolidated (% debt stock t-1)+14%-0.10.4-1.91.32.93.6House price index, nominal (1 year % change)+9%6.04.44.08.513.08.0House prices over/undervaluation gap (7)-0.84.95.810.0Standardized price-to-income ratio94.099.496.999.2Building permits (m2 per 1000 inh)338.5250.4299.9354.1GovernmentGeneral government gross debt (% of GDP)60%99.6114.8105.2101.6100.098.2General government balance (% of GDP)-2.9-7.0-3.3-3.2-2.5-2.1Banking sectorReturn on equity of banks (%)7.35.511.813.7Tier-1 capital ratio banking sector (% risk-weighted assets)13.514.714.715.0Gross non-performing loans, domestic and foreign entities (% gross loans)3.72.82.72.52.5Cost of borrowing for households for house purchase (%)1.91.73.83.42.8Cost of borrowing for NFCs (%)1.81.74.54.73.5Labour marketUnemployment rate (% labour force Y15-74)+10%12.6 (8)15.514.512.211.410.49.8Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp-0.4-0.52.30.90.70.3           forecast 
      
 
3. Country sections 

FRANCE 

Vulnerabilities  related  to  competitiveness  continue  to  recede.  Both  headline  and  core  inflation 
remain below the euro area average. The real effective exchange rate has been stable, and ULCs 
have  increased  less  than  the  euro  area  average,  supporting  competitiveness.  Fiscal  sustainability 
risks have aggravated as government debt has increased further due to high government deficits 
amid low nominal GDP growth. While remaining high, private debt ratios have decreased further.  

Real  GDP  growth  stood  at  1.2%  in  2024  and  is  forecast  to  decrease  to  0.7%  in  2025  before 
rebounding slightly to 0.9% in 2026. Headline inflation decreased to 2.3% in 2024 and is expected 
to  stand  at  1.0%  in  2025.  Core  inflation  declined  to  2.3%  in  2024  and  has  decreased  further  in 
2025.  It  is  set  to  stand  at  1.7%  in  2025,  remaining  below  the  euro  area  average.  The 
unemployment rate stood at 7.4% in 2024 and is expected to increase to 7.6% in 2025.  

The  scoreboard  reading  for  France  shows  that  four  indicators  were  beyond  their  indicative 
thresholds in 2024, namely  nominal  unit labour costs, household debt, non-financial  corporations 
debt, and government debt. Relevant developments worth highlighting: 

•  External sustainability indicators remain stable, with the current account turning into balance 
in 2024. The NIIP continued to further increase, reaching -23.0% of GDP in 2024, and is forecast 
to remain relatively stable. 

•  Competitiveness  developments  remain  stable.  Since  mid-2024,  both  headline  and  core 
inflation  have  been  below  euro  area  averages.  Last  year,  the  REER  remained  stable,  while  by 
mid-2025  and  despite  the  NEER  appreciation,  it  fell,  driven  by  the  stronger  negative  inflation 
differential with main trading partners. ULC grew by only 2.7% in 2024 (with a 3-year change of 
11.4%) due to muted nominal wage growth and to some productivity gains, and ULC is expected 
to grow by 1.6% in 2025. Over the  3 years up to 2024, France’s export market share against 
advanced economies remained broadly unchanged.  

•  High  levels  of  non-financial  corporate  indebtedness  and  a  further  deterioration  in  debt 
service capacity weigh on the financial soundness of the NFC sector. Deleveraging slowed and 
NFC debt in France remains above the MIP threshold, at 90.7% of GDP. No further deleveraging 
is expected over the next year or two. Credit growth fell to 1.5% in 2024. The interest coverage 
ratio is the lowest in the EU and fell further in 2024, hovering slightly above 2, its lowest level 
since the beginning of the monetary union. While in most EU countries interest expenses peaked 
in 2024 and have started to decline, they have increased continuously in France from 2022-Q2 
until 2024-Q4 weighing on the debt service capacity. Despite a slight increase from 2023, the 
share  of  NPLs  has  remained  comparatively  low  (at  3.8%  in  2025-Q2),  and  the  gap  between 
bankruptcy filings and new business registrations has narrowed. Yet, bankruptcy filings remain 
at historical highs. 

•  The  household  debt  ratio  continued  to  decline  and  reached  61%  of  GDP  (74%  of  GHDI)  in 
2024 on the back of a further slow-down in net credit flows. In-year data suggest credit flows 
are slowly recovering in 2025, but not yet sufficiently to put a brake on deleveraging. The saving 
rate remains almost 4 pps. of GHDI above its long-term average, and even more above the rate 
that could be expected based on the downward trend observed over the 2010s. The increase is 
mostly reflected in a pickup in financial savings, as investment fell sharply. 

•  House prices decreased by 3.7% in 2024. In the first half of 2025, house prices were showing 
signs of stabilisation. The price-to-income ratio was 5 pps. below its long-term average in 2024, 
but it takes 13.3 years of income to buy a 100m² apartment, while the long-term EU average is 

55 

3. Country sections 

8  years,  suggesting  house  prices  are  high  relative  to  income.  Overvaluation  stood  at  9%. 
Building  permits  were  low  (371  m²  per  1000  persons),  indicating  potential  supply  constraints 
(37).  In  2024,  borrowing  capacity  rose  by  only  1.1%  as  interest  rates  on  loans  for  house 
purchases  still  increased,  offsetting  the  positive  impact  of  rising  incomes  and  declining  house 
prices.  

•  Government debt is high and increasing as a result of large deficits. Government debt edged 
up  to  113.2%  of  GDP in 2024,  some  15 pps.  above  its pre-COVID-19  level. Moreover,  debt is 
forecast  to  increase  further  in  2025  and  2026.  The  government  deficit  remains  high.  It 
worsened in 2024, to 5.8% of GDP, and is forecast to improve only marginally this year. Gross 
financing  needs  are  high  and  not  declining,  on  account  of  the  high  debt  and  deficits. 
Considerable uncertainty underlies the fiscal outlook for 2026, with risks tilted to the downside, 
as  the  parliamentary  discussions  are  ongoing.  Spreads  on  French  long-term  sovereign  bonds 
compared  with the best rated  euro area sovereign debt  widened in mid and late 2024 before 
stabilising somewhat in 2025, although they have recently again started to trend up slowly. The 
rating  agency  Fitch  downgraded  French  sovereign  debt  to  A+  this  September  and  Standard  & 
Poor’s  did  so  in  October,  whereas  Moody’s  kept  the  rating  but  with  a  negative  outlook.  An 
excessive  deficit  procedure  for  France  has  been  in  place  since  July  2024.  Government 
guarantees have been among the largest in the EU. Fiscal sustainability risks remain high in the 
medium term (38). 

•  The  financial  sector  continues  to  be  characterised  by  a  relatively  low  profitability  of  banks 
compared  to  other  EU  countries.  The  low  profitability  is  mainly  due  to  slow  balance-sheet 
repricing  with  fixed-rate  mortgages  and  regulated  savings  products,  delaying  banks’  ability  to 
profit from higher interest rates. A temporary tax surcharge on large companies weighs on net 
profits for banks with greater French exposure. French banks’ capitalisation is also lower than in 
the majority of other EU countries. The NPL ratio has been stable and close to the EU average, 
as  have  Stage  2  loans.  Retail  and  consumer  lending  volumes  started  to  recover  in  late  2024. 
The banking sector has rather high exposure to the commercial real estate, but risks seem to be 
contained due to conservative underwriting standards and diversified CRE loan books.  

Graph 3.10: Selected graphs, France 

Source: Eurostat and European Commission forecasts and calculations. 

(37)  EU last decade average stands at around 450 m² per 1000 persons. 

(38)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

56 

0501001502002503003501112131415161718192021222324% of GDPb) Decomposition of debt by sectorGovernmentHouseholds (+NPISH)Non-financial corporationsPrivate sector-4-202468141516171819202122232425f26fPpsa) Decomposition of rate of change of ULC Inflation (HICP)Real Compensation/hr.Productivity/hr. (neg. contrib.)ULCULC in EU27     
 
 
Table 3.10:  Key economic and financial indicators, France 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

57 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)1.90.61.41.20.70.9Real GDP per capita (1 year % change)1.50.11.20.90.40.7GDP deflator (1 year % change)1.02.45.02.11.51.7Harmonised index of consumer prices (1 year % change)1.52.85.72.31.01.3Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)0.71.84.02.31.71.6External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%-0.4-0.7-0.7-0.8-0.20.4Current account balance, balance of payments (% of GDP)-0.2 (1)0.8 (2)-0.2-1.1-1.00.10.20.8of which: trade balance (% GDP)-0.8-1.8-1.4-0.1of which: income balance (% GDP)0.60.70.30.2Net international investment position (% of GDP)-35%-77.3 (3)8.2 (4)-25.7-31.1-31.9-23.0-26.9-25.5NENDI - NIIP excluding non-defaultable instruments (% of GDP)-32.3-34.2-31.7-29.9Net lending-borrowing (% of GDP)-0.1-0.8-0.80.3CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)1.85.98.911.48.25.5Nominal unit labour cost index per hour worked (1 year % change)0.33.13.82.71.51.3Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)1.1-0.6-1.8-1.1-2.0-2.8Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.6-1.33.50.3-1.7-0.8Export performance against advanced economies (3y % change)-3%-2.1-6.32.40.28.45.3Export performance against advanced economies (1 year % change)-0.6-2.12.2-0.81.10.9Core inflation differential vis-à-vis the euro area (pps.)-0.3-0.3-1.0-0.5-0.7-0.6CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%51.2 (5)65.1 (6)88.6100.692.390.792.493.7NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%5.56.52.51.54.94.8Households and housing marketHousehold debt, consolidated (% of GDP)+55%43.3 (5)63.1 (6)60.966.862.560.560.059.8Household debt, consolidated (% of GHDI)77.882.077.273.8Household credit flow, consolidated (% debt stock t-1)+14%5.55.11.30.21.32.2House price index, nominal (1 year % change)+9%3.15.9-0.4-3.70.02.0House prices over/undervaluation gap (7)9.018.316.68.5Standardized price-to-income ratio102.8109.3103.295.3Building permits (m2 per 1000 inh)573.6560.3437.3370.5GovernmentGeneral government gross debt (% of GDP)60%98.5113.0109.8113.2116.3118.1General government balance (% of GDP)-2.7-6.8-5.4-5.8-5.5-4.9Banking sectorReturn on equity of banks (%)6.35.85.96.6Tier-1 capital ratio banking sector (% risk-weighted assets)15.717.017.317.5Gross non-performing loans, domestic and foreign entities (% gross loans)2.82.01.92.02.0Cost of borrowing for households for house purchase (%)1.51.33.03.43.0Cost of borrowing for NFCs (%)1.51.44.34.63.6Labour marketUnemployment rate (% labour force Y15-74)+10%7.8 (8)8.97.77.37.47.68.0Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp0.40.31.91.51.01.0           forecast 
      
 
3. Country sections 

CROATIA 

In  Croatia,  price  pressures  and  cost  competitiveness  pressures  persist,  leading  to  increased 
macroeconomic risks. Unit labour costs have continued growing significantly due to wage increases 
and  inflation  rates  have  remained  elevated,  among  the  highest  in  the  euro  area.  While  external 
sustainability has remained sound, cost pressures are weighing on the services sector. House prices 
have  increased  noticeably  over  the  past  years  while  bank  lending  for  house  purchases  has  been 
buoyant.  

Real  GDP  grew  by  3.8%  in  2024  and  is  forecast  to  grow  by  3.2%  in  2025  and  2.9%  in  2026. 
Headline  inflation  decreased  to  4.0%  in  2024,  and  is  set  to  stand  at  4.3%  in  2025.  While 
decreasing, core inflation remained high in 2024, at 4.8%, and it is set to stand at 4.1% in 2025. 
Hence,  the  core  inflation  differential  against  the  euro  area,  which  narrowed  to  1.9 pps.  in  2024, 
would stand at 1.7 pps. in 2025, mostly driven by services related to tourism. The unemployment 
rate stood at 5.0% in 2024 and is expected to decrease to 4.7% in 2025.  

The  scoreboard  reading  for  Croatia  shows  that  three  indicators  were  beyond  their  indicative 
thresholds in 2024, namely the real effective exchange rate, nominal unit labour costs, and house 
prices. Relevant developments worth highlighting: 

•  External  sustainability  remained  sound  in  2024,  despite  the  deterioration  of  the  current 
account balance. The current account balance shifted from 0.1% of GDP in 2023 to a deficit of 
2.2% in 2024, due to a reduction in the services balance. The current account deficit is forecast 
to  increase  slightly.  The  NIIP  worsened  somewhat  to  -29.6%  of  GDP  in  2024  after  years  of 
improvements, but should somewhat strengthen over 2025 and 2026. The NIIP excluding non-
defaultable instruments (NENDI) was positive, at 21.4% of GDP in 2024. 

•  Competitiveness concerns persist. Headline and core inflation were 4% and 4.8% respectively 
in 2024, some of the highest in the EA. They continued to remain high by mid-2025, due to the 
services  and  food  components.  The  REER  appreciated  by  5.4%  in  the  3  years  to  2024  and 
appreciated  by  1.5%  year-on-year  in  2024,  driven  by  nominal  appreciation.  It  continued  to 
appreciate  in  the  first  half  of  2025  at  around  the  same  pace.  In  2024,  ULC  growth  was 
substantially higher than the euro area average (10.8% vs. 4.5%), with nominal wage increases 
and productivity losses contributing to the increase. The 3-year cumulated change in ULC stood 
at 31.8%. The robust pace of ULC growth is expected to continue in 2025, at above 8%, before 
moderating more visibly in 2026. Croatia recorded an increase of almost 18% in export market 
share against advanced economies in the 3 years up  to 2024, although gains have started to 
flatten as of late. 

•  The  non-financial  corporate  sector  has  remained  robust  with  low  leverage  and  a  healthy 
debt service capacity. In 2024, NFC debt-to-GDP decreased slightly to 41.8% while credit growth 
declined  to  5.3%.  However,  since  mid-2024  bank  loan  flows  to  NFCs  have  increased  across 
maturities suggesting a possible pickup in credit growth in 2025. The interest coverage ratio has 
declined  recently  but  remains  among  the  highest  in  the  EU  and  debt  service  capacity  stayed 
solid.  Activity  and  profitability  indicators  deteriorated  somewhat  in  recent  quarters,  while  the 
share  of  NPLs  has  decreased  further  (although  it  remains  high  compared  to  other  euro  area 
countries) and bankruptcies have grown less strongly than new business registrations.  

•  The household debt ratio remained stable at a low level (30% of GDP and 41% of GHDI) in 
2024, but credit flows have been growing dynamically since 2020. In 2024, credit flows stood 
at 3% of GDP and at 11% of the previous year’s debt stock. If credit growth remains strong, the 
debt  ratio  will  start  growing  again  as  of  2025.  New  macroprudential  measures  have  been 

58 

3. Country sections 

introduced  as  of  the  second  part  of  2025.  They  seem  to  have  caused  some  frontloading  of 
borrowing (also helped by a temporary reduction in the cost of borrowing for new loans) in the 
first  half  of  the  year,  with  credit  growing  even  faster  in  2025-Q2  but  decelerating  again  in 
2025-Q3. Households’ gross saving rate is at par with its pre-pandemic level and in line with its 
long-term average. NPLs to households have continued to decrease but remain at a significant 
proportion (more than 3%) of all bank loans to households. 

•  House prices increased by 10.4% in 2024. In the first half of 2025 house prices continued to 
grow at a fast pace. The price-to-income ratio was 8 pps. below the long-term average, but it 
takes  16.0  years  of  income  to  buy  a  100m²  apartment,  while  the  long-term  EU  average  is  8 
years, suggesting house prices are high relative to income. Overvaluation stood at 14%. Building 
permits remain at an adequate level  (569 m² per 1000 persons), indicating adequate housing 
supply  (39).  The  recent  evolution  in  house  prices  was  driven  by  the  increase  of  16.5%  in 
borrowing capacity due to the rise in incomes which offset the increase in interest rates.  

•  Government debt is limited and is declining further. The government debt fell to 57.4% of GDP 
in  2024,  which  is  some  14  pps.  below  its  pre-COVID-19  level.  Debt  is  forecast  to  continue 
decreasing in 2025. The fiscal deficit worsened to 1.9% of GDP in 2024, and it is expected to 
widen somewhat further this year and to stabilise next, but to remain below 3% of GDP. Gross 
financing needs are expected  to increase somewhat this year and beyond, and to surpass the 
euro area average, amid an average debt maturity of just over five years, which is among the 
lowest in the euro area. Fiscal sustainability risks remain medium in the medium term (40). 

•  The  financial  sector  remains  stable.  The  non-performing  loans  ratio  keeps  declining  but 
remains above the EU median. Bank profitability further remained high in 2024, above the EU 
median. The Tier 1 capital ratio stays one of the highest in the EU despite a recent decline. Loan 
growth  remains  strong.  The  financial  sector’s  exposure  to  domestic  sovereign  debt  while 
declining remains one of the highest in the euro area. 

Graph 3.11: Selected graphs, Croatia 

Source: Eurostat, ECB and European Commission forecasts and calculations. 

(39)  EU last decade average stands at around 450 m² per 1000 persons. 

(40)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

59 

-10-50510152002040608010012014016018020007080910111213141516171819202122232425Rate of change y-o-y (%)2020 = 100a) Nominal house price (2020=100)Nominal house price index (2020 =100)Nominal house price growth rate (y-o-y)-4-2024681012142122232425% growth year on yearData up to 2025-10b) Core inflation year on year: Croatia compared to EA MSHREA20   
 
 
Table 3.11:  Key economic and financial indicators, Croatia 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

60 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)3.13.53.83.83.22.9Real GDP per capita (1 year % change)4.44.33.73.53.02.9GDP deflator (1 year % change)1.73.612.94.54.63.6Harmonised index of consumer prices (1 year % change)1.24.48.44.04.32.8Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)0.93.18.84.84.12.7External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%2.3-0.4-1.0-1.9-1.7-2.8Current account balance, balance of payments (% of GDP)-1.3 (1)-2.6 (2)2.1-1.70.1-2.2-3.0-3.2of which: trade balance (% GDP)-0.2-5.4-2.1-4.6of which: income balance (% GDP)2.43.62.22.4Net international investment position (% of GDP)-35%-57.4 (3)-26.8 (4)-60.0-42.5-26.8-29.6-28.7-26.7NENDI - NIIP excluding non-defaultable instruments (% of GDP)-9.89.320.121.4Net lending-borrowing (% of GDP)3.40.62.9-0.8CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)1.69.513.831.834.225.7Nominal unit labour cost index per hour worked (1 year % change)1.53.611.610.88.54.5Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)2.0-0.54.35.44.83.7Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.6-0.24.51.51.60.5Export performance against advanced economies (3y % change)-3%11.9-0.236.717.59.56.2Export performance against advanced economies (1 year % change)3.03.05.51.01.50.6Core inflation differential vis-à-vis the euro area (pps.)-0.11.13.91.91.70.5CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%71.3 (5)40.4 (6)58.653.042.241.841.140.9NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%-2.92.96.05.38.27.9Households and housing marketHousehold debt, consolidated (% of GDP)+55%47.8 (5)18.8 (6)34.835.129.630.231.934.0Household debt, consolidated (% of GHDI)48.746.242.141.4Household credit flow, consolidated (% debt stock t-1)+14%5.94.09.510.914.213.5House price index, nominal (1 year % change)+9%6.39.911.910.413.08.0House prices over/undervaluation gap (7)-7.22.910.413.6Standardized price-to-income ratio89.593.392.991.6Building permits (m2 per 1000 inh)342.7438.6544.4568.6GovernmentGeneral government gross debt (% of GDP)60%73.377.760.957.456.256.1General government balance (% of GDP)0.2-3.2-0.8-1.9-2.8-2.9Banking sectorReturn on equity of banks (%)7.97.315.715.0Tier-1 capital ratio banking sector (% risk-weighted assets)20.723.021.720.5Gross non-performing loans, domestic and foreign entities (% gross loans)7.14.22.52.32.4Cost of borrowing for households for house purchase (%)3.52.83.23.73.0Cost of borrowing for NFCs (%)2.72.14.64.93.7Labour marketUnemployment rate (% labour force Y15-74)+10%6.2 (8)8.77.26.15.04.74.5Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp0.12.52.92.93.03.9           forecast 
      
 
3. Country sections 

ITALY 

In Italy, concerns about high government debt remain alongside weak productivity growth. Despite 
narrowing  markedly  in  2024,  the  government  deficit,  together  with  the  impact  of  the  debt-
increasing interest-growth-rate differentials and stock-flow adjustment, continues to contribute to 
further increases in the government debt ratio. Domestic banks continue to hold a significant share 
of government debt, which increases the risk of feedback loops. At the same time, muted inflation 
developments and ULC increases that are in line with the euro area average have contributed to 
strengthening external sustainability.  

Real  GDP growth declined slightly  to 0.7% in 2024 and is forecast to decrease mildly to 0.4% in 
2025 before reaching 0.8% in 2026. Headline inflation decreased to 1.1% in 2024. It rebounded 
slightly  and  is  set  to  reach  1.7%  in  2025.  Core  inflation  decreased  to  2.2%  in  2024  and  has 
remained stable,  with the forecast  for 2025 standing at 2.0%, below the euro area average. The 
unemployment rate stood at 6.5% in 2024 and is expected to decrease to 6.2% in 2025.  

The  scoreboard  reading  for  Italy  shows  that  one  indicator  was  beyond  its  indicative  threshold  in 
2024, namely government debt. Relevant developments worth highlighting: 

•  External  sustainability  indicators  continue  to  strengthen,  with  a  current  account  surplus  of 
1.1% of GDP in 2024, up from 0.2% in 2023. The current account surplus is forecast to remain 
stable  in  2025.  The  NIIP also  increased  from  8.9%  of  GDP  in  2023  to  14.9%  in  2024,  and  is 
forecast to remain stable.  

•  Competitiveness developments remain subdued. Last year, inflation was among the lowest in 
the  EU.  The  REER  depreciated,  pushed  by  the  negative  inflation  differential  and  despite  the 
strong NEER gain, but appreciated by mid-2025 following the euro strengthening since April. For 
2024, ULC growth evolved broadly in line with the EA and is expected to follow closely in 2025 
as  well,  with  productivity  per  hour  worked  evolving  negatively  since  2023,  and  adding  to  ULC 
growth.  The  3-year  change  in  export  market  share  against  advanced  economies  was  slightly 
negative (-0.8%) in 2024, marked by a drop within the year. 

•  The non-financial corporate sector is characterised by low leverage and a solid debt service 
capacity. In 2024, NFC debt decreased slightly to 56% of GDP and is expected to remain broadly 
stable over the coming years. Credit growth stayed in negative territory at -1.6%, but bank loan 
flows to NFCs show a clear upward trend  pointing to a recovery in credit growth. The interest 
coverage ratio fell in 2024 but is still comparatively high and has started to increase again in 
recent  quarters.  The  profit  share  continued  to  fall  as  did  unit  profit  growth,  and  activity 
indicators  such  as  gross  value-added  growth  or  the  change  in  accounts  receivable  turnover 
remained muted.  

•  The household debt ratio continued to decline in 2024 to a moderate 36% of GDP (48% of 
GHDI), as borrowing remained  subdued.  In-year data suggest a recovery of net credit flows in 
2025 and 2026, with the debt-to-GDP ratio remaining broadly stable. The saving rate remains 
around 2 pps. of GHDI above its pre-pandemic level. This is reflected in investment in gross (and 
net) fixed capital formation, which was also boosted by government support (in the form of net 
capital transfers) through the superbonus programme over recent years. Financial savings have 
in contrast shrunk significantly in 2024. 

•  House prices rose by 3.2% in 2024 and continued to grow moderately into 2025. The price-to-
income ratio was 15 pps. below the long-term average, suggesting house prices are moderate 
relative  to  income.  House  prices  are  estimated  to  be  undervalued  by  7%.  However,  building 

61 

3. Country sections 

permits  were  critically  low  (81  m²  per  1000  persons),  indicating  low  supply  (41).  The  recent 
evolution  in  average  house  prices  has  been  supported  by  the  decrease  in  interest  rates 
combined with rising incomes that led to a 11.5% increase in borrowing capacity in 2024.  

•  Government  debt  is  high  and  increasing.  Government  debt  edged  up  to  134.9%  of  GDP  in 
2024,  which  is  around  its  pre-COVID-19  level.  The  government  deficit  declined  markedly  to 
3.4%  of  GDP  in  2024  and  it  is  expected  to  decline  this  year  and  next.  Debt  is  forecast  to 
increase further in 2025 and 2026, reflecting also debt-increasing stock-flow adjustments owed 
to the lagged impact on cash borrowing of the housing renovation tax credits in previous years – 
the superbonus programme – on top of the deficits and against a backdrop of low GDP growth. 
Gross  financing  needs  are  the  highest  in  the  euro  area  and  not  declining  much.  Spreads  on 
Italian long-term sovereign bonds compared with the best rated euro area sovereign debt have 
narrowed  further  in  2025.  Besides,  some  of  the  major  credit  rating  agencies  improved  their 
ratings of Italy’s sovereign debt in 2025. Government guarantees have been among the largest 
in  the  EU.  An  excessive  deficit  procedure  for  Italy  is  in  place  since  July  2024.  The  fiscal 
sustainability risks remain high in the medium term (42). 

•  Financial  sector  vulnerabilities  remain  despite  substantial  improvements  over  recent  years. 
The  Tier  1  capital  ratio  remained  broadly  stable,  although  below  the  EU  median.  Bank 
profitability  remained  strong  in  2024  and  was  close  to  the  EU  median.  The  non-performing 
loans  ratio  stagnated  in  2024  and  at  2.7%  remained  above  the  EU  median.  Bank  lending 
volumes remained muted in 2024, with some signs of recovery for the household segment amid 
decreasing borrowing cost. Strong exposure to the domestic sovereign, which is one of the most 
indebted in the EU, remains a risk for banks in Italy. 

Graph 3.12: Selected graphs, Italy 

Source: Eurostat and European Commission forecasts and calculations. 

(41)  EU last decade average stands at around 450 m² per 1000 persons. 

(42)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

62 

6080100120060810121416182022242006 = 100b) Productivity by sector -ITMarket services (G_N)Manufacturing (C)Construction (F)Tradable (A_E, G_J)Non tradable (F, K_U)-20-15-10-50510152025080910111213141516171819202122232425f26fPps.a) Drivers of government debt ratio evolution in ITPrimary balanceInterest expenditureReal growth effectGDP deflator effectStock flow adjustmentChange in debt ratio   
 
 
Table 3.12:  Key economic and financial indicators, Italy 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

63 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)0.91.31.00.70.40.8Real GDP per capita (1 year % change)1.21.71.00.70.50.9GDP deflator (1 year % change)0.92.16.22.02.21.8Harmonised index of consumer prices (1 year % change)1.03.45.91.11.71.3Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)0.61.54.52.22.02.0External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%2.42.50.1-0.20.81.0Current account balance, balance of payments (% of GDP)1.4 (1)1.2 (2)2.71.30.21.11.00.9of which: trade balance (% GDP)2.81.21.62.3of which: income balance (% GDP)-0.10.1-1.4-1.2Net international investment position (% of GDP)-35%-71.7 (3)22.3 (4)-6.14.48.914.911.212.3NENDI - NIIP excluding non-defaultable instruments (% of GDP)-5.92.06.713.5Net lending-borrowing (% of GDP)2.71.51.01.1CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)1.63.84.28.511.610.7Nominal unit labour cost index per hour worked (1 year % change)1.00.93.34.33.62.4Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)0.3-1.00.70.0-2.7-3.5Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.1-0.63.4-1.2-0.9-0.9Export performance against advanced economies (3y % change)-3%-1.0-4.32.7-0.84.30.8Export performance against advanced economies (1 year % change)-0.6-1.44.2-2.30.90.4Core inflation differential vis-à-vis the euro area (pps.)-0.4-0.5-0.4-0.6-0.4-0.2CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%62.4 (5)31.3 (6)65.667.257.956.055.656.0NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%-0.13.1-1.4-1.62.23.6Households and housing marketHousehold debt, consolidated (% of GDP)+55%36.3 (5)29.9 (6)40.942.336.936.035.935.9Household debt, consolidated (% of GHDI)52.653.549.147.8Household credit flow, consolidated (% debt stock t-1)+14%2.52.7-0.60.62.22.7House price index, nominal (1 year % change)+9%-0.62.71.33.24.03.0House prices over/undervaluation gap (7)-6.2-5.0-6.9-6.6Standardized price-to-income ratio92.090.885.285.3Building permits (m2 per 1000 inh)79.683.379.781.4GovernmentGeneral government gross debt (% of GDP)60%133.9146.2133.9134.9136.4137.9General government balance (% of GDP)-2.1-8.8-7.2-3.4-3.0-2.8Banking sectorReturn on equity of banks (%)5.95.312.713.2Tier-1 capital ratio banking sector (% risk-weighted assets)14.416.716.917.2Gross non-performing loans, domestic and foreign entities (% gross loans)8.83.62.72.72.7Cost of borrowing for households for house purchase (%)1.91.74.23.83.2Cost of borrowing for NFCs (%)1.81.64.95.23.8Labour marketUnemployment rate (% labour force Y15-74)+10%7.8 (8)10.69.07.76.56.26.1Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp1.5-1.03.22.11.81.1           forecast 
      
 
3. Country sections 

CYPRUS 

While  remaining  high,  private  debt  ratios  continue  to  decrease,  driven  by  debt  repayment  and 
nominal  GDP  growth.  Government  debt  has  also  been  decreasing  due  to  sustained  budget 
surpluses. In the financial sector, NPL ratios continue to fall. However, the external deficit remains 
very substantial, standing at 8.2% of GDP in 2024, driven primarily by the repatriation of profits by 
foreign-owned companies, as well as high domestic demand.  

Real  GDP  grew  by  3.9%  in  2024  and  is  forecast  to  grow  by  3.4%  in  2025  and  2.6%  in  2026. 
Headline inflation decreased to 2.3% in 2024 and has decreased further in 2025, with the annual 
forecast standing at 0.9%. Core inflation also eased, to 2.6% in 2024, and is set to stand at 2.0% 
in  2025,  below  the  euro  area  average.  The  unemployment  rate  stood  at  4.9%  in  2024  and  is 
expected to decrease to 4.7% in 2025.  

The scoreboard reading for Cyprus shows that six indicators were beyond their indicative thresholds 
in 2024, namely the current account deficit, the net international investment position, unit labour 
costs,  household  debt,  non-financial  corporations  debt,  and  government  debt.  Relevant 
developments worth highlighting: 

•  External sustainability concerns remain. The current account deficit narrowed to 8.2% of GDP 
in 2024 from 9.7% in 2023. It is one of the highest deficits in the EU, and far in excess of the 
deficits  recorded  before  the  pandemic  as  well  as  the  level  suggested  by  fundamentals.  Non-
energy  goods  and  primary  income  balances  were  the  key  contributors,  mainly  reflecting  the 
repatriation of profits, and strong domestic demand. The current account deficit is expected to 
narrow somewhat but remain elevated. The NIIP improved, reaching -84.1% of GDP in 2024, on 
the back of strong GDP growth and valuation effects. It is forecast to further increase. The NIIP 
largely  reflects  the  activities  of  special  purpose  entities  (SPEs).  The  NIIP  excluding  SPEs  was 
estimated at around -33% in 2024.  

•  Competitiveness  indicators  remain  stable.  In  2024  both  headline  and  core  inflation  were 
below the EA values, and headline inflation continued to fall in 2025 with negative contributions 
from energy and non-energy industrial  goods components. The REER remained flat  over 2024 
despite NEER gains. Last year ULC growth was 1.6% (3-year change of 13.7%) and is forecast 
to  reach  1.8%  in  2025  as  nominal  wage  growth  remains  moderate  and  productivity  gains 
strong, due to a growing export-oriented ICT sector. The 2024 3-year change in export market 
share is positive, in double digits territory. 

•  The non-financial corporate debt-to-GDP ratio has continued falling but remains elevated. 
NFC  debt decreased to  116%  of  GDP  in  2024, its  lowest  level  in  two  decades,  but is  still the 
third highest in the EU and above the MIP threshold of 85%. Close to one-third of corporate debt 
is FDI debt with a high share of non-financial special purpose entities. Credit growth was muted 
at  0.6%  in  2024.  Bank  loan  flows  increased  again  in  recent  quarters  and  with  an  expected 
recovery in borrowing, deleveraging is expected to slow. While the share of NPLs remains among 
the highest in the EU, it has continued to decrease.  

•  The household debt  ratio continued falling strongly  in 2024, to 57% of GDP (81% of GHDI), 
more than 30 pps. less than four years ago. Deleveraging was underpinned by strong real GDP 
growth  and  still  elevated  inflation,  while  net  credit  flows  contracted  further.  Credit  flows  are 
expected to start recovering gradually as of 2025 and to slow down debt deleveraging. At 6% in 

64 

3. Country sections 

2024  (43),  the  household  saving  rate  stands  around  its  pre-pandemic  level.  It  is  expected  to 
increase going forward on the back of solid disposable income growth. Non-performing loans to 
households  in  Cyprus  still  make  up  a  considerable  proportion  (8%)  of  overall  bank  loans  to 
households, the highest proportion among EU countries, but it continues to decrease.  

•  House  prices  increased  by  2.1%  in  2024  and  remained  stable  in  the  first  half  of  2025.  The 
price-to-income  ratio  was  25  pps.  below  the  long-term  average  suggesting  house  prices  are 
moderate  relative  to  income.  Building  permits  were  abundant  (1953  m²  per  1000  persons), 
indicating no supply constraints (44). The recent evolution in house prices has been supported by 
rising incomes that led to an 8.7% increase in borrowing capacity in 2024. 

•  Government debt is moderate and has continued to decrease. It fell further to 62.8% of GDP 
in  2024,  which is  some  30  pps.  below its  pre-COVID-19 level. Government  debt  is  forecast  to 
decrease visibly again in 2025 and 2026, likely falling below 60% of GDP this year. Significant 
budgetary surpluses have been recorded since 2022 – 4.1% of GDP in 2024 alone – which are 
expected  to  continue,  even  if  likely  more  limited,  thereby  helping  the  debt  reduction.  Fiscal 
sustainability risks remain medium in the medium term (45). 

•  The financial sector situation has improved over recent years, but some concerns persist. The 
Cypriot banking sector performed positively in 2024. Banking profitability hit record highs, and 
stands well above the EU median, as does the banking sector’s capitalisation. Non-performing 
bank loans further declined to 3.1%, still above the EU median. NPLs have largely migrated to 
the  non-bank  financial  sector.  In  addition,  the  Credit  Acquiring  Companies  are  in  large  part 
foreign  owned,  which  limits  the  impact  of  these  NPLs  on  the  domestic  financial  sector.  Credit 
provision  remained  muted  in  2024,  due  to  tight  financial  conditions  and  macroprudential 
tightening  aimed  to  reinforce  financial  buffers.  High  exposure  to  commercial  real  estate 
represents a source of risk, related to potential valuation changes, though there are no sign of 
stress in the Cypriot commercial real estate market. 

Graph 3.13: Selected graphs, Cyprus 

Source: Eurostat and European Commission forecasts and calculations. 

(43)  The benchmark revision implied a considerable upward revision of households’ gross saving rate. 

(44)  EU last decade average stands at around 450 m² per 1000 persons. 

(45)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

65 

-40-30-20-10010203020212223242525f26f% of GDPa) Decomposition of external position (current and capital accounts)DiscrepancyGoods, fcastServices, fcastGoods excl energyEnergy balanceServices excl travelTravel balancePrimary inc. bal.Current accountNet lending/borrowing-450-300-1500150300080910111213141516171819202122232425f% of GDPb) Decomposition of Net International Investment PositionReserve assetsNet portfolio investment, equity and investment fund shares/unitsNet portfolio investment, debt securitiesOther investment (net)Net direct investmentNet financial derivatives and employee stock optionsNet Int'l investment position (NIIP)NENDI (NIIP excluding non-defaultable instruments)     
 
 
Table 3.13:  Key economic and financial indicators, Cyprus 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

66 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)6.05.33.63.93.42.6Real GDP per capita (1 year % change)4.83.71.62.32.01.4GDP deflator (1 year % change)1.12.85.63.11.61.7Harmonised index of consumer prices (1 year % change)0.73.03.92.30.91.5Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)0.51.83.82.62.02.1External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%-4.1-6.9-7.4-8.3-8.6-7.8Current account balance, balance of payments (% of GDP)-2.2 (1)0.1 (2)-4.8-7.4-9.7-8.2-7.8-7.4of which: trade balance (% GDP)0.72.32.03.6of which: income balance (% GDP)-5.5-9.6-11.8-11.8Net international investment position (% of GDP)-35%-66.7 (3)-44.3 (4)-124.9-109.6-92.4-84.1-77.8-77.5NENDI - NIIP excluding non-defaultable instruments (% of GDP)-319.6-198.7-80.1-52.9Net lending-borrowing (% of GDP)-4.5-7.3-9.7-8.8CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)0.35.27.513.712.35.4Nominal unit labour cost index per hour worked (1 year % change)2.30.98.61.61.81.9Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)-1.5-1.90.31.0-3.5-2.5Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)-0.1-1.03.70.4-1.6-0.5Export performance against advanced economies (3y % change)-3%14.329.620.715.012.816.6Export performance against advanced economies (1 year % change)4.510.22.85.34.62.8Core inflation differential vis-à-vis the euro area (pps.)-0.6-0.2-1.1-0.2-0.40.0CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%62.1 (5)124.8 (6)191.3161.9124.5116.0111.4109.4NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%3.2-0.10.10.61.43.6Households and housing marketHousehold debt, consolidated (% of GDP)+55%36.7 (5)89.1 (6)96.479.362.357.455.955.2Household debt, consolidated (% of GHDI)128.7103.188.980.9Household credit flow, consolidated (% debt stock t-1)+14%1.31.80.92.12.43.1House price index, nominal (1 year % change)+9%2.6-0.32.92.12.01.9House prices over/undervaluation gap (7)-2.5-11.2-16.1-18.6Standardized price-to-income ratio95.884.278.274.8Building permits (m2 per 1000 inh)1690.42058.82088.31952.5GovernmentGeneral government gross debt (% of GDP)60%96.596.871.162.856.451.0General government balance (% of GDP)-0.1-1.51.74.13.33.0Banking sectorReturn on equity of banks (%)-0.40.821.818.3Tier-1 capital ratio banking sector (% risk-weighted assets)16.819.423.425.9Gross non-performing loans, domestic and foreign entities (% gross loans)23.07.03.73.13.1Cost of borrowing for households for house purchase (%)2.42.34.24.53.5Cost of borrowing for NFCs (%)3.63.25.55.44.2Labour marketUnemployment rate (% labour force Y15-74)+10%6.7 (8)8.97.05.84.94.74.5Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp1.52.63.11.80.1-0.9           forecast 
      
 
3. Country sections 

LATVIA 

Cost  competitiveness  is  deteriorating  amid  stagnant  economic  activity,  leading  to  increased 
macroeconomic  risks.  Despite  a  slow-down,  wage  growth  remains  high  and  unit  labour  costs  are 
expected  to  continue  growing  faster  than  the  euro  area  average  in  2025.  The  current  account 
deficit  narrowed  in  2024  against  the  backdrop  of  stagnating  economic  activity,  but  export 
performance continued to worsen.  

Real  GDP  stagnated  in  2024.  It  is  forecast  to  rebound  in  2025,  growing  by  1.0%,  before 
accelerating  to  a  1.7%  growth  in  2026.  Headline  inflation  decreased  to  1.3%  in  2024,  but  it 
rebounded and is set to reach 3.6% in 2025. While decreasing, core inflation reached 3.7% in 2024 
and is set to stand at 3.4% in 2025 (above the euro area average). The unemployment rate stood 
at 6.9% in 2024 and is set to stand at 6.8% in 2025.  

The  scoreboard  reading  for  Latvia  shows  that  two  indicators  were  beyond  their  indicative 
thresholds in 2024, namely the real effective exchange rate and nominal unit labour cost. Relevant 
developments worth highlighting: 

•  The external sector improved somewhat. The current account deficit  narrowed from 3.8% of 
GDP  in  2023  to  1.6%  in  2024,  as  the  economy  stagnated.  The  deficit  is  forecast  to  widen 
noticeably in 2025. The net international investment position increased to around -20% of GDP 
in  2024  and 
investment.  The  net  position  excluding 
non-defaultable instruments, the NENDI, was positive in 2024. 

is  mostly  composed  of  direct 

•  Competitiveness concerns persist, driven by wage increases. In 2024, annual average headline 
inflation was below the euro area value, although core inflation was above. In 2024, the 3-year 
change in the REER was almost 10%, mostly due to high inflation in 2022 and 2023, but year-
on-year it depreciated by 1% despite some nominal appreciation. It remained broadly flat in the 
first  half  of  2025.  Robust  nominal  wage  increases and  stagnating productivity  pushed  ULC  to 
increase  by  close  to  9%  in  2024  (cumulating  to  over  32%  over  the  last  3  years),  which  is 
expected to moderate to around 5% in 2025. The 3-year change in export market share against 
advanced economies was negative in 2023 and 2024. 

•  Low  indebtedness,  a  solid  debt  service  capacity  and  a  low  share  of  NPLs  underpin  the 
robustness of the  non-financial corporate sector. NFC debt stood at 36% of GDP in 2024, 
and it is expected  to increase slightly in the coming years. Credit growth increased to 5.7% in 
2024. The share of NPLs fell further and remains one of the lowest in the EU. Profitability and 
activity  indicators  have  been  weak.  Real  investment  growth  turned  negative  in  2024  and  was 
among  the  lowest  in  the  EU.  However,  as  financial  conditions  improved,  investments  have 
surged in the first half of 2025 with real investment growth reaching 8.5% in 2025-Q2.  

•  The  household  debt  ratio  increased  slightly  to  19%  of  GDP  (27%  of  GHDI)  in  2024  and 
remains  low.  Credit  growth  is  dynamic,  at  8%  of  last  year’s  stock,  and  if  continued,  the  debt 
ratio  is  set  to  continue  increasing  over  the  coming  years.  In  spite  of  a  low  debt  stock, 
households’ net interest payments increased to more than 3.6% of GHDI in 2024. The cost of 
borrowing on outstanding loans peaked at around 6% in 2023 and remains high at more than 
4%  in  2025-Q3.  Households’  gross  saving  rate  took  a  strong  hit  in  2022  and  2023  as  real 
incomes  contracted  on  the  back  of  high  inflation,  but  is  gradually  recovering  as  consumption 
remains  flat  while  disposable  income  is  recovering.  Savings  are  mainly  invested  in  physical 
capital, but financial saving turned positive in 2024 after two years of negative values. 

67 

3. Country sections 

•  House prices increased by 4.2% in 2024 and have continued to grow at a slightly faster pace 
into 2025. The price-to-income ratio was 13 pps. below the long-term average suggesting house 
prices are moderate relative to income. Overvaluation stood at 10%. Building permits were low 
(375 m² per 1000 persons), indicating potential supply constraints (46). The recent evolution in 
house prices has been supported by the decrease in interest rates, combined with rising incomes 
that led to a 13.2% increase in borrowing capacity in 2024. 

•  Government debt remains limited although it has increased recently. It came to 46.6% of GDP 
in 2024. Debt is forecast to increase further in 2025 and 2026. The government deficit declined 
to 1.8% of GDP in 2024 but is expected to worsen to 3.1% of GDP this year and even more next 
year.  The  fiscal  sustainability  risks  have  worsened  and  are  now  borderline  between  low  and 
medium in the short term, and medium in the medium term, having previously been assessed as 
low in both the short and medium terms (47). 

•  Financial sector resilience reflects the sound and well capitalised banking sector with strong 
digital adoption. The Tier 1 capital ratio declined in 2024 but remains one of the highest in the 
EU. Profitability remained strong in 2024 and is well above the EU median. The non-performing 
loans  ratio  remained  stable  and  is  below  the  EU  median.  Stage  2  loans  slightly  increased  in 
2024.  Credit  dynamics  were  boosted  by  the  reduction  in  capital  requirements  for  commercial 
real estate loans. The significant exposure of lenders to real estate represents a potential risk. 

Graph 3.14: Selected graphs, Latvia 

Source: Eurostat and European Commission forecasts and calculations. 

(46)  EU last decade average stands at around 450 m² per 1000 persons. 

(47)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

68 

-10-8-6-4-202468101112131415161718192021222324Pps.a) HICP/CPI-based REER, 42 part.ΔNEERΔInfl.REER-10-505101520141516171819202122232425f26fPps.b) Decomposition of rate of change of ULC Inflation (HICP)Real Compensation/hr.Productivity/hr. (neg. contrib.)ULCULC in EU27     
 
 
Table 3.14:  Key economic and financial indicators, Latvia 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

69 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)2.81.7-0.90.01.01.7Real GDP per capita (1 year % change)3.62.2-0.70.82.22.8GDP deflator (1 year % change)3.65.110.72.14.83.6Harmonised index of consumer prices (1 year % change)2.76.69.11.33.62.2Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.93.48.43.73.42.7External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%0.8-0.6-4.5-3.6-3.2-3.0Current account balance, balance of payments (% of GDP)-1.5 (1)-1.9 (2)0.3-2.2-3.8-1.6-4.1-3.3of which: trade balance (% GDP)-0.4-2.2-3.7-1.6of which: income balance (% GDP)0.70.0-0.20.0Net international investment position (% of GDP)-35%-50.3 (3)-24.3 (4)-47.1-30.4-25.5-19.7-22.5-23.1NENDI - NIIP excluding non-defaultable instruments (% of GDP)1.418.120.427.4Net lending-borrowing (% of GDP)1.8-0.9-1.9-0.3CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)14.414.920.732.224.417.5Nominal unit labour cost index per hour worked (1 year % change)5.15.29.38.74.73.2Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)3.64.611.09.61.9-0.7Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)1.31.97.2-0.90.60.0Export performance against advanced economies (3y % change)-3%4.513.3-1.9-2.9-3.52.8Export performance against advanced economies (1 year % change)1.74.9-4.8-1.42.91.6Core inflation differential vis-à-vis the euro area (pps.)0.91.43.50.91.00.6CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%80.5 (5)68.7 (6)50.640.835.336.036.637.2NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%1.80.61.45.79.69.0Households and housing marketHousehold debt, consolidated (% of GDP)+55%55.3 (5)19.8 (6)21.820.118.219.419.920.6Household debt, consolidated (% of GHDI)31.328.327.027.3Household credit flow, consolidated (% debt stock t-1)+14%2.05.04.38.38.99.1House price index, nominal (1 year % change)+9%9.19.33.74.23.03.0House prices over/undervaluation gap (7)-5.26.412.410.3Standardized price-to-income ratio86.290.090.487.0Building permits (m2 per 1000 inh)294.2370.3372.0375.4GovernmentGeneral government gross debt (% of GDP)60%38.844.844.446.648.349.9General government balance (% of GDP)-0.6-5.4-2.4-1.8-3.1-3.5Banking sectorReturn on equity of banks (%)8.86.620.317.6Tier-1 capital ratio banking sector (% risk-weighted assets)20.226.220.621.9Gross non-performing loans, domestic and foreign entities (% gross loans)4.92.71.31.31.3Cost of borrowing for households for house purchase (%)2.72.75.55.44.2Cost of borrowing for NFCs (%)3.03.25.96.45.0Labour marketUnemployment rate (% labour force Y15-74)+10%6.7 (8)7.57.56.56.96.86.6Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp1.8-0.4-1.40.9-0.4-0.3           forecast 
      
 
3. Country sections 

LITHUANIA 

Cost  pressures  remain  but  have  been  moderating  and  external  sustainability  indicators  are 
favourable. Headline and core inflation have decreased markedly but core inflation is expected to 
remain above the euro area average in 2025 and 2026. While decelerating, unit labour costs have 
continued  to  grow  significantly,  adding  to  previous  years  of  strong  increases.  House  prices 
increased strongly in 2024 and are set to slightly moderate in 2025.  

Real GDP growth rebounded to 3.0% in 2024 and is forecast to decrease slightly to 2.4% in 2025 
before  increasing  to  3.0%  in  2026.  Headline  inflation  decreased  strongly,  to  0.9%  in  2024,  and 
rebounded  in  2025,  with  the  annual  forecast  standing  at  3.4%.  Core  inflation  also  decreased 
significantly, reaching 3.2% in 2024. It has remained broadly stable and is set to stand at 3.1% in 
2025  with  the  core  inflation  differential  against  the  euro  area  increasing  slightly.  The 
unemployment rate stood at 7.1% in 2024 and is expected to remain unchanged in 2025.  

The  scoreboard  reading  for  Lithuania  shows  that  three  indicators  were  beyond  their  indicative 
thresholds  in  2024,  namely  real  effective  exchange  rate,  nominal  unit  labour  costs,  and  house 
prices. Relevant developments worth highlighting: 

•  External  developments  remained  favourable.  The  current  account  balance  increased  from 
1.1% of GDP in 2023 to 3.2% in 2024 and is forecast to decrease somewhat. The NIIP increased 
and reached a  close to  a balanced level in 2024. As liabilities largely consist of foreign direct 
investment, the NIIP net of non-defaultable instruments is positive. 

•  Competitiveness  concerns  remain  but  are  moderating.  In  2024,  annual  average  headline 
inflation  was  the  lowest  in  the  euro  area  on  account  of  negative  contributions  from  energy, 
although core inflation was 3.2%. Both headline and core inflation are expected to stay above 
euro area values in 2025. In 2024, the 3-year change in REER cumulated to more than 9%, but 
year-on-year  it  depreciated  by  1.6%  due  to  negative  inflation  differential  and  despite  some 
nominal  exchange  gains,  while  for  2025  it  remained  broadly  flat.  Strong  nominal  wage 
increases have pushed ULC growth at close to 6% in 2024 (and 36% over the last 3 years), with 
the  same  growth  expected  in  2025.  The  3-year  change  in  exports  market  share  against 
advanced economies remains positive, but a clear flattening trend is visible over time. 

•  Despite a deterioration in profitability measures, the non-financial corporate sector remains 
robust marked by low leverage, strong debt service capacity, and resilient activity. NFC debt-to-
GDP  stood  at  30.5%  in  2024,  among  the  lowest  values  in  the  EU.  Credit  growth  declined 
somewhat to 8.5% but bank loan flows to non-financial corporates increased in recent quarters 
signalling  a  possible  pick-up  in  corporate  credit  growth  ahead.  The  interest  coverage  ratio 
declined but remained above the EU/EA average. Bankruptcies increased somewhat, unit profit 
decreased, and the profit margin contracted further. Debt service capacity and activity indicators 
remained robust.  

•  The household debt ratio increased slightly to 22% of GDP (31% of GHDI) in 2024 but remains 
low. It has been relatively stable around that level for the last decade. Dynamic credit growth is 
likely to put upward pressure on the household debt ratio over the next years. Households’ gross 
saving rate is solid, substantially above its pre-pandemic level, and forecast to strengthen going 
forward. Savings are used to finance investment, with the financial saving rate around  zero in 
2024.  

•  House prices increased by 9.7% in 2024 and continued to rise at a similar rate in the first half 
of 2025. The price-to-income ratio was 6 pps. below the long-term average, suggesting house 

70 

3. Country sections 

prices  are  moderate  relative  to  income.  Overvaluation  stood  at  9%  in  2024.  Building  permits 
were 450 m² per 1000 persons, indicating mild supply constraints  (48). The recent evolution in 
house prices has been supported by the decrease in interest rates combined with rising incomes 
that led to a 11.2% increase in borrowing capacity in 2024. The recent evolution in house prices 
has been supported by the decrease in interest rates combined with rising incomes that led to 
an 11.2% increase in borrowing capacity in 2024.  

•  Government  debt  remains  limited  even  if  increasing  recently.  Government  debt  came  in  at 
38%  of  GDP  in  2024.  It  is  forecast  to  increase  further  in  2025  and  2026.  The  fiscal  deficit 
increased to 1.3% of GDP in 2024; while it is expected to increase this year, it is still forecast to 
be  below  3%  of  GDP.  Gross  financing  needs  are  expected  to  increase  further  but  to  remain 
below the euro area average. Fiscal sustainability risks remain medium in the medium term (49). 

•  The  financial  sector  is  characterised  by  a  sound  and  well-capitalised  banking  sector  with 
strong  digital  adoption.  Capitalisation  remains  one  of  the  highest  in  the  EU.  Profitability 
remained  strong  in  2024  and  is  the  highest  in  the  EU.  The  non-performing  loans  ratio  is  the 
lowest in the EU. Credit growth recovered in late 2024. 

Graph 3.15: Selected graphs, Lithuania 

Source: Eurostat and European Commission forecasts and calculations. 

(48)  EU last decade average stands at around 450 m² per 1000 persons. 

(49)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

71 

-100102030141516171819202122232425f26fPpsb) Decomposition of rate of change of ULC Inflation (HICP)Real Compensation/hr.Productivity/hr. (neg. contrib.)ULCULC in EU27-8-6-4-20246810121819202122232425Annual % changea) HICP/CPI-based REER, 42 part.NEERInfl.REER     
 
 
Table 3.15:  Key economic and financial indicators, Lithuania 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

72 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)4.72.90.73.02.43.0Real GDP per capita (1 year % change)5.62.7-0.72.42.33.3GDP deflator (1 year % change)3.47.710.03.23.53.9Harmonised index of consumer prices (1 year % change)2.87.98.70.93.42.8Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)2.35.49.63.23.13.3External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%0.32.9-1.2-0.62.02.0Current account balance, balance of payments (% of GDP)-1.2 (1)-1.1 (2)1.70.81.13.21.51.1of which: trade balance (% GDP)3.13.83.95.5of which: income balance (% GDP)-1.4-3.0-2.8-2.2Net international investment position (% of GDP)-35%-61.9 (3)-11.7 (4)-30.4-13.4-4.6-0.7-1.60.6NENDI - NIIP excluding non-defaultable instruments (% of GDP)-1.619.326.533.6Net lending-borrowing (% of GDP)3.12.42.74.7CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)14.720.037.136.225.215.9Nominal unit labour cost index per hour worked (1 year % change)4.88.412.25.65.63.9Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)4.46.913.09.20.8-0.9Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)1.23.26.3-1.60.40.6Export performance against advanced economies (3y % change)-3%14.820.36.62.82.24.9Export performance against advanced economies (1 year % change)7.55.8-1.61.01.61.0Core inflation differential vis-à-vis the euro area (pps.)1.33.54.60.40.71.1CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%79.8 (5)49.8 (6)34.230.629.730.531.231.4NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%7.39.212.08.59.69.0Households and housing marketHousehold debt, consolidated (% of GDP)+55%56.5 (5)17.8 (6)22.523.121.121.923.524.9Household debt, consolidated (% of GHDI)33.332.130.531.2Household credit flow, consolidated (% debt stock t-1)+14%8.39.96.610.513.813.5House price index, nominal (1 year % change)+9%7.714.09.89.79.06.0House prices over/undervaluation gap (7)-7.3-0.75.48.9Standardized price-to-income ratio86.386.391.994.0Building permits (m2 per 1000 inh)531.0627.3452.7450.1GovernmentGeneral government gross debt (% of GDP)60%36.042.537.138.039.844.7General government balance (% of GDP)0.4-2.8-0.7-1.3-2.2-2.5Banking sectorReturn on equity of banks (%)12.011.321.218.7Tier-1 capital ratio banking sector (% risk-weighted assets)18.921.618.621.1Gross non-performing loans, domestic and foreign entities (% gross loans)2.51.40.80.70.5Cost of borrowing for households for house purchase (%)2.32.45.55.24.0Cost of borrowing for NFCs (%)2.62.96.06.14.8Labour marketUnemployment rate (% labour force Y15-74)+10%6.6 (8)6.57.26.97.17.16.8Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp2.61.40.31.30.60.3           forecast 
      
 
3. Country sections 

LUXEMBOURG 

Private sector debt remains high, and house prices have continued to correct. The debt of the non-
financial corporate sector increased further in 2024 and is the highest in the EU. Household debt 
remains high compared to incomes. After a further correction in 2024, house prices seem to have 
stabilised but continue to show signs of overvaluation.  

Real  GDP  growth  stood  at  0.4%  in  2024  and  is  forecast  increase  to  0.9%  in  2025  and  1.9%  in 
2026. Headline inflation, which was below 3% in 2023, eased to 2.3% in 2024 and is set to remain 
at the same value for 2025. At 2.5% in 2024, core inflation was below the euro area average and 
remained below also in 2025, with the annual forecast standing at 1.9%. The unemployment rate 
stood at 6.4% in 2024 and is expected to increase in 2025 (to 6.6%).  

The  scoreboard  reading  for  Luxembourg  shows  that  four  indicators  are  beyond  their  indicative 
thresholds  in  2024,  namely  the  export  performance  against  advanced  economies,  nominal  unit 
labour costs, and both the household and non-financial corporations debt. Relevant developments 
worth highlighting: 

•  External sustainability indicators remain elevated. The current account surplus decreased to 
4.3% of GDP in 2024, from 6.8% of GDP in 2023. It exceeds the level explained by economic 
fundamentals.  The  current  account  surplus  is  forecast  to  further  decrease  in  2025  before 
increasing again. The NIIP remained positive but is forecast to decrease.  

•  Competitiveness  developments  remain  moderate.  The  2024  headline  and  core  inflation 
averages were close to euro area values, while headline hovered around the target in the first 
months of 2025. The REER remained almost constant in 2024 and appreciated only slightly by 
mid-2025 on account of euro’s appreciation. Last year ULC increased by 4.1% (bringing the 3-
year change to 24.2%) and are expected to grow above 4% in 2025, with the 3-year increase 
set  to  remain  above  the  Scoreboard  threshold.  In  2024,  the  3-year  change  in  export 
performance against advanced economies is still negative, with a large in-year drop. 

•  Robust  profitability  notwithstanding, 

the  non-financial  corporate  sector 

remains 
characterised by high leverage and a weak debt service capacity. The NFC debt-to-GDP ratio hit 
a new record high by increasing to 271.6% in 2024, the highest level in the EU. Close to two-
thirds  of  this  debt  can  be  attributed  to  FDI,  with  intra-group  financing  including  with  special 
purpose  entities  and  multinational  companies  playing  an  important  role.  Credit  growth  was 
negative at -1.7% and bank loan flows to non-financial corporations declined in recent months. 
A fall in corporate savings in 2024 and a low  interest coverage ratio strained the debt service 
capacity. The share of NPLs increased in 2024 albeit from comparatively low levels and is now 
around  the  EU  median.  Profitability  remained  robust,  but  financing  conditions  stayed  tight  by 
historical standards and debt serviceability continues to be weak as in other euro area countries. 

•  The  household  debt  ratio  decreased  to  62%  of  GDP  in  2024,  still  high  and  above  the  MIP 
threshold  of  55%.  When  expressed  as  a  %  of  GHDI,  it  remains  among  the  highest  household 
debt  ratios  observed  in  the  EU  at  125%  in  2024.  Deleveraging  was  supported  by  subdued 
borrowing  activity  in  a  context  of  elevated  inflation.  Credit  flows  are  expected  to  gradually 
recover  over  the  next  years,  slowing  down  the  deleveraging  process.  At  12%  in  2024, 
households’  saving  rate  has  returned  to  its  longer-term  average.  While  financial  savings  have 
been volatile, investment in GFCF has remained solid at around 10%. 

•  House prices decreased by 5.2% in 2024, after having fallen by around 9% in 2023, but in the 
first half of 2025 hey show signs of moderated growth. The price-to-income ratio was 19 pps. 

73 

3. Country sections 

above  the  long-term  average.  suggesting  house  prices  are  still  elevated  relative  to  income. 
Overvaluation  stood  at  10%.  Building  permits  were  reduced  to  737  m²  per  1000  persons, 
indicating that housing supply remains dynamic (50).  

•  Government  debt  remains  low.  Debt  edged  up  to  26.3%  of  GDP  in  2024  and  is  forecast  to 
stay  close  to  that  level  in  2025  and  2026.  The  government  balance  turned  into  a  surplus  of 
0.9% of GDP in 2024, while deficits standing below 1% of GDP are expected this year and next.  

•  The  large  financial  sector  is  stable  but  has  substantial  exposures  to  certain  sectors.  The 
banking  sector  is  well  capitalised  and  liquid,  and  profitability  has  risen  sharply  in  2024, 
benefiting  from  higher  interest  rates.  The  ratio  of  non-performing  loans  has  been  very  low 
despite a mild increase in 2024. High household indebtedness, coupled with recent adjustment 
of  overvalued  house  prices,  represents  the  main  risk  for  the  domestically  oriented  banking 
sector.  The  credit  provision  has  been  very  muted  in  2024.  The  financial  sector  is  also 
significantly exposed to the commercial real estate sector, although mainly via large investment 
funds without a direct link to domestic real estate.  

Graph 3.16: Selected graphs, Luxembourg 

Source: Eurostat, ECB and European Commission calculations 

(50)  EU last decade average stands at around 450 m² per 1000 persons. 

74 

123456-20-15-10-5051015201516171819202122232425%%a) Housing marketHouse price (y-o-y growth rate, lhs)Loans for house purchase (y-o-y growth rate, lhs)Interest rate (rhs)0501001502002503003504001112131415161718192021222324% of GDPb) Decomposition of debt by sectorGovernmentHouseholds (+NPISH)Non-financial corporationsPrivate sector   
 
 
Table 3.16:  Key economic and financial indicators, Luxembourg 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

75 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)1.91.70.10.40.91.9Real GDP per capita (1 year % change)-0.20.0-1.8-1.2-0.50.4GDP deflator (1 year % change)1.65.36.94.63.03.0Harmonised index of consumer prices (1 year % change)1.93.82.92.32.31.7Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.42.33.92.51.91.8External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%7.26.15.75.55.04.3Current account balance, balance of payments (% of GDP)4.2 (1)4.9 (2)7.75.06.84.34.04.7of which: trade balance (% GDP)36.938.238.138.3of which: income balance (% GDP)-29.2-33.2-31.3-34.0Net international investment position (% of GDP)-35%-161.7 (3)69.4 (4)57.146.347.639.431.828.3NENDI - NIIP excluding non-defaultable instruments (% of GDP)-3738.2-4176.8-3850.8-4099.2Net lending-borrowing (% of GDP)8.54.36.84.3CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)9.110.821.024.218.610.7Nominal unit labour cost index per hour worked (1 year % change)4.14.69.44.14.12.2Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)1.50.6-1.5-2.4-3.3-0.9Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.7-0.1-0.5-0.1-0.1-0.4Export performance against advanced economies (3y % change)-3%2.714.8-6.1-15.91.4-2.3Export performance against advanced economies (1 year % change)1.20.66.8-8.63.82.8Core inflation differential vis-à-vis the euro area (pps.)0.40.3-1.1-0.3-0.5-0.3CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%126.6 (5)88.0 (6)231.5266.7264.1271.6255.1250.1NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%-7.71.5-10.0-1.7-6.48.4Households and housing marketHousehold debt, consolidated (% of GDP)+55%96.8 (5)83.0 (6)65.167.463.261.660.559.5Household debt, consolidated (% of GHDI)133.2136.7129.6125.0Household credit flow, consolidated (% debt stock t-1)+14%7.37.3-2.81.22.23.3House price index, nominal (1 year % change)+9%7.612.6-9.1-5.20.03.0House prices over/undervaluation gap (7)1.028.920.410.4Standardized price-to-income ratio115.4143.3131.6119.4Building permits (m2 per 1000 inh)1641.11403.3898.5737.0GovernmentGeneral government gross debt (% of GDP)60%21.724.524.726.326.827.1General government balance (% of GDP)2.4-0.6-0.70.9-0.8-0.5Banking sectorReturn on equity of banks (%)5.55.08.38.9Tier-1 capital ratio banking sector (% risk-weighted assets)20.619.018.518.4Gross non-performing loans, domestic and foreign entities (% gross loans)0.70.70.80.90.9Cost of borrowing for households for house purchase (%)1.71.64.14.03.4Cost of borrowing for NFCs (%)1.31.43.84.23.3Labour marketUnemployment rate (% labour force Y15-74)+10%5.9 (8)5.65.65.26.46.66.7Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp0.51.91.91.31.00.3           forecast 
      
 
3. Country sections 

HUNGARY 

In Hungary, core inflation has remained elevated and unit labour costs have continued to increase 
significantly, recording one of the largest cumulative increases in the EU over the past 3 years. The 
current account balance recorded a surplus in 2024 against the backdrop of stagnating economic 
activity, but export performance has worsened recently. The government deficit narrowed in 2024 
but  remains  significant,  contributing  to  increases  in  the  government  debt-to-GDP  ratio  in  the 
context  of  lower  nominal  GDP  growth  than  in  previous  years.  After  a  slow-down  in  2023,  house 
prices have picked-up.  

Following a contraction in 2023, real GDP grew mildly by 0.6% in 2024. It is expected to grow by 
0.4%  in  2025  before  accelerating  in  2026,  with  real  GDP  growth  set  to  reach  2.3%.  Headline 
inflation decreased strongly, to 3.7% in 2024, but it has rebounded slightly and is set to stand at 
4.5%  in  2025.  Core  inflation  also  decreased  significantly  in  2024,  to  5.9%.  It  has  decreased 
marginally further and is set to stand at 5.3% in 2025, with the core inflation differential against 
the  euro  area  remaining  high  but  narrowing  from  3.1  pps.  in  2024  to  2.8  pps.  in  2025.  The 
unemployment rate stood at 4.5% in 2024 and is set to remain stable in 2025.  

The  scoreboard  reading  for  Hungary  shows  that  three  indicators  were  beyond  their  indicative 
thresholds in 2024, namely nominal unit labour costs, house prices, and government debt. Relevant 
developments worth highlighting: 

•  External sustainability concerns continued to recede somewhat. In 2024, the current account 
balance  further  increased,  reaching  1.6%  of  GDP,  from  a  balanced  level  in  the  previous  year, 
mainly  driven  by  low  domestic  demand  due  to  stagnating  economic  activity  and  an 
improvement in the terms of trade. The current account surplus is forecast to decrease in 2025. 
The NIIP remained relatively stable, reaching -34.2% of GDP in 2024, and is projected to reduce.  

•  Competitiveness concerns persist. In 2024 headline inflation was 3.7%, but an uptick to 4.5% 
is expected in 2025. Core inflation was close to 6% in 2024 and is expected to drop by less than 
1  pp.  in  2025.  Last  year,  the  REER  depreciated  by  more  than  2%,  as  the  forint  shed  value  in 
nominal terms against the main trading partners’ currencies. By mid-2025, the REER continued 
to  depreciate  on  account  of  the  NEER  component.  The  recent  trend  of  strong  nominal  wage 
growth  continued  in  2024  and,  together  with  subdued  productivity  growth,  pushed  ULCs  to 
increase  by  close  to  12%,  pushing  the  3-year  growth  to  almost  48%.  Despite  moderating, 
annual ULC growth is still expected to remain high in 2025, at around 9%. The 3-year increase 
in  ULCs  has  been  above  the  scoreboard  threshold  since  2020.  The  3-year  change  in  export 
market share against advanced economies is flat in 2024, marked by a large in-year drop. 

•  Despite  low  levels  of  non-financial  corporate  indebtedness,  a  weak  debt  service  capacity 
and low profitability point to weaknesses in the sector. NFC debt stayed broadly stable at 56% 
of GDP while credit growth decreased to 3.1%. Bank loan flows to NFCs have decreased further 
in  recent  months.  Interest  expenses  have  started  to  decline  recently,  however,  so  has  gross 
operating surplus. The share of NPLs remained broadly stable at slightly above 3% (around the 
EU median), while bankruptcy filings, which had grown markedly between mid-2022 and mid-
2023, declined somewhat. The profit share has fallen together with return on equity, and debt 
service capacity has deteriorated as savings and the interest coverage ratio decreased. 

•  The  household  debt  ratio  remained  stable  around  17%  of  GDP  (24%  of  GHDI)  in  2024, 
among  the  lowest  in  the  EU.  Credit  growth  accelerated  to  around  10%  of  the  previous  year’s 
debt  stock,  which,  if  it  continues,  is  likely  to  exert  upward  pressure  on  the  debt  ratio  going 
forward.  At  19%  in  2024,  the  gross  saving  rate  is  among  the  highest  in  the  EU.  While 

76 

3. Country sections 

investment  in  fixed  capital  is  not  particularly  high in  comparison  with  the  EU  overall,  Hungary 
has a very high financial saving rate (13% of adjusted GHDI). The proportion of non-performing 
loans to households kept declining and reached around 3% in 2024. 

•  House prices increased by 13.7% in 2024 in nominal terms and maintained a strong growth in 
the  first  half  of  2025.  The  price-to-income  ratio  was  1  pps.  below  its  long-term  average  in 
2024,  but  it  takes  14.3  years  of  income  to  buy  a  100m²  apartment,  while  the  long-term  EU 
average is 8 years, suggesting house prices are elevated relative to income. Overvaluation stood 
at  10%.  Building  permits  were  low  in  2024  (241  m²  per  1000  persons),  indicating  potential 
supply constraints (51), which would fuel house price increases looking ahead. Recent growth in 
house  prices  has  been  supported  by  subsidised  mortgage  programmes  and  rising  household 
incomes, both of which have boosted households’ borrowing capacity. 

•  Government debt is  significant  and  not  declining, as  fiscal  deficits  remain  high. Government 
debt edged slightly up to 73.5% of GDP in 2024, which is still above its pre-COVID-19 level by 
some 9 pps. The government deficit fell  to 5% of GDP in 2024 but it is expected to decrease 
only marginally in 2025 and worsen in 2026. With lower nominal GDP growth than in previous 
years,  the  government  debt  ratio  is  forecast  to  increase  somewhat  in  2025  and  2026. 
Government  gross  financing  needs  continue  being  sizeable.  Yields  on  Hungarian  long-term 
sovereign  bond  yields  remain  among  the  highest  in  the  EU.  Interest  expenditure  doubled  in 
recent years to close to 5% of GDP in 2024 and is expected to remain elevated at some 4% of 
GDP. A significant share of government debt is denominated in foreign currencies (around 30% 
in 2024). Government guarantees are significant and have been increasing in recent years. An 
excessive  deficit  procedure  for  Hungary  has  been  in  place  since  July  2024.  The  fiscal 
sustainability  risks  have  worsened  and  are  now  high  in  the  medium  term,  whereas  they  were 
previously assessed as medium (52). 

•  The financial sector remains sound overall, but some vulnerabilities remain. The Tier 1 capital 
ratio increased and is close to the EU median. The non-performing loans ratio has been declining 
and attained historical lows. Government policies, including specific taxes on the banking sector 
and  interest  rate  caps,  have  had  an  adverse  impact  on  profitability.  Nevertheless,  banks  have 
earned high interest income, and their profitability remained strong in 2024, well above the EU 
median.  The  extensive  use  of  caps  on  loans  and  deposits  rates  hampers  the  functioning  of 
monetary policy. Hungarian banks’ exposure to domestic sovereign debt is among the highest in 
the EU and it increased in 2024 because the government is providing tax incentives for banks to 
hold more sovereign debt. 

(51)  EU last decade average stands at around 450 m² per 1000 persons. 

(52)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

77 

 
Graph 3.17: Selected graphs, Hungary 

3. Country sections 

Source: Eurostat and European Commission forecasts and calculations. 

Table 3.17:  Key economic and financial indicators, Hungary 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

78 

-15-10-5051020212223242525f26f% of GDPa) Decomposition of external position (current and capital accounts)Goods, fcastServices, fcastGoods excl energyEnergy balanceServices excl travelTravel balancePrimary inc. bal.Second. inc. bal.Current accountNet lending/borrowing-505101520141516171819202122232425f26fPpsb) Decomposition of rate of change of ULC Inflation (HICP)Real Compensation/hr.Productivity/hr. (neg. contrib.)ULCULC in EU27averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)4.92.2-0.80.60.42.3Real GDP per capita (1 year % change)5.22.5-0.70.90.62.5GDP deflator (1 year % change)4.58.815.17.66.44.3Harmonised index of consumer prices (1 year % change)2.97.817.03.74.53.6Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)2.05.614.05.95.34.4External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%1.8-2.5-4.5-2.50.50.4Current account balance, balance of payments (% of GDP)0.1 (1)-1.8 (2)0.5-4.90.01.60.1-0.3of which: trade balance (% GDP)4.3-1.44.14.3of which: income balance (% GDP)-3.8-3.5-4.1-2.7Net international investment position (% of GDP)-35%-53.6 (3)-10.5 (4)-46.5-48.4-39.2-34.2-32.2-30.0NENDI - NIIP excluding non-defaultable instruments (% of GDP)-4.6-2.2-6.74.1Net lending-borrowing (% of GDP)2.1-2.81.21.9CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)10.518.136.647.640.328.1Nominal unit labour cost index per hour worked (1 year % change)3.98.015.811.58.75.7Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)0.9-5.710.37.310.41.6Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.2-2.715.3-2.30.83.5Export performance against advanced economies (3y % change)-3%2.8-0.21.60.3-0.1-6.2Export performance against advanced economies (1 year % change)0.9-1.18.2-5.4-2.61.1Core inflation differential vis-à-vis the euro area (pps.)0.93.69.13.12.82.3CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%63.8 (5)46.1 (6)50.360.055.656.354.153.9NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%9.116.77.53.13.79.3Households and housing marketHousehold debt, consolidated (% of GDP)+55%43.5 (5)33.0 (6)18.320.116.817.117.818.4Household debt, consolidated (% of GHDI)27.229.123.823.5Household credit flow, consolidated (% debt stock t-1)+14%7.511.93.79.911.110.6House price index, nominal (1 year % change)+9%14.514.37.113.715.09.0House prices over/undervaluation gap (7)-2.99.19.010.5Standardized price-to-income ratio96.8104.297.399.3Building permits (m2 per 1000 inh)408.5356.5260.6240.5GovernmentGeneral government gross debt (% of GDP)60%68.676.373.273.573.773.9General government balance (% of GDP)-2.2-6.9-6.8-5.0-4.6-5.1Banking sectorReturn on equity of banks (%)14.510.821.219.4Tier-1 capital ratio banking sector (% risk-weighted assets)15.617.117.818.7Gross non-performing loans, domestic and foreign entities (% gross loans)6.03.32.42.22.1Cost of borrowing for households for house purchase (%)4.55.19.87.16.9Cost of borrowing for NFCs (%)1.74.812.79.08.1Labour marketUnemployment rate (% labour force Y15-74)+10%5.1 (8)3.63.94.14.54.54.4Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp3.62.23.02.31.20.8           forecast+ If actual data were unavailable at the cut-off date, forecast or nowcast data are presented instead;   * Denotes values above prudential thresholds;     
 
 
      
 
3. Country sections 

MALTA 

In Malta, economic activity has remained strong and price pressures have been contained, with core 
inflation  below  the  euro  area  average  and  unit  labour  costs  set  to  slow  down.  External  sector 
developments  have  been  favourable.  House  price  increases  have  been  robust,  but  there  are  no 
signs  of  overvaluation.  The  government  deficit  narrowed,  and  government  debt  is  set  to  remain 
broadly stable in 2025 and 2026.  

Real GDP growth reached 6.8% in 2024 and is forecast to decrease to 4.0% in 2025 and 3.8% in 
2026.  Headline  inflation  decreased  to  2.4%  in  2024  and  is  set  to  remain  unchanged  in  2025. 
Similarly,  core  inflation  decreased  significantly  and  reached  2.1%  in  2024,  below  the  euro  area 
average.  It  is  set  to  stand  at  2.3%  in  2025,  almost  in  line  with  the  euro  area  average.  The 
unemployment rate stood at 3.1% in 2024 and is set to decrease to 3.0% in 2025.  

The scoreboard reading for Malta shows that one indicator was beyond its indicative threshold in 
2024, namely nominal unit labour costs. Relevant developments worth highlighting: 

•  External  sustainability  indicators  remained  positive.  In  2024,  the  current  account  surplus 
increased, reaching 7.1% of GDP, while it is forecast to fall in 2025. The NIIP decreased in 2024, 
reaching around 84% of GDP, but remaining one of the highest within the EU. The NIIP continues 
to  remain  above  levels  suggested  by  economic  fundamentals  and  is  forecast  to  increase 
slightly, also reflecting the country’s position as an international financial centre.  

•  Competitiveness pressures are contained. Headline and core inflation have been close to euro 
area  averages  in  2024  and  are  set  to  remain  so  in  2025  as  well.  Last  year,  the  REER 
appreciated  slightly  on  account  of  the  nominal  euro  gains,  but  it  depreciated  by  2%  by  mid-
2025. ULC grew close to 5% in 2024 (with the 3-year growth standing at 13.6%), despite robust 
productivity  growth.  It  is  expected  to  pick  up  to  6%  in  2025,  as  productivity  is  expected  to 
flatten.  The  3-year  change  in  export  market  share  against  advanced  economies  has  been 
positive, in double digits territory. 

•  The  NFC  sector  remained  robust  as  the  non-financial  corporate  debt-to-GDP  ratio 
decreased somewhat to 61% in 2024. The debt-to-GDP ratio is expected to broadly stay at this 
level over the next years. Credit growth decreased to 4.4% and bank loan flows to NFCs have 
declined in recent quarters. Debt service capacity remained solid with the interest coverage ratio 
increasing again in 2024 after two years of decline. The share of NPLs fell further and is now 
close  to  the  EU  median.  Similarly,  bankruptcies  decreased  somewhat.  Activity  and  profitability 
indicators remained solid and real investment turned positive again in 2024.  

•  The  household  debt  ratio  remained  stable  at  around  47%  of  GDP  (71%  of  GHDI)  in  2024. 
Credit growth was dynamic amid low interest rates compared to the rest of the euro area, but 
its  impact  on  the  debt  ratio  was  counteracted  by  strong  nominal  GDP  growth.  With  real  GDP 
growth decelerating, the debt ratio could start increasing again as of 2025. At 19% in 2024, the 
household saving rate stands above its pre-pandemic level and is among the highest in the EU.  

•  House prices increased by  6.7% in 2024  and continued to grow at a similar pace into 2025. 
The price-to-income ratio was 7 pps. below the long-term average, suggesting house prices are 
moderate relative to income. Undervaluation stood at 13%. Building permits remain high (2284 
m² per 1000 persons), reflecting a significant reaction of supply to increased demand (53), which 

(53)  EU last decade average stands at around 450 m² per 1000 persons. 

79 

 
3. Country sections 

may  also  stem  from  the  population  increasing  significantly  in  the  recent  years.  The  recent 
evolution in house prices has been supported  by  the decrease in interest rates combined with 
rising incomes that led to a 10.4% increase in borrowing capacity in 2024. 

•  Government debt is limited but deficits are significant, even if declining. Government debt fell 
marginally to 46.2% of GDP in 2024. It is forecast to increase marginally in 2025 and 2026. The 
government  deficit  receded  further  to  3.5%  of  GDP  in  2024  and  it  is  forecast  to  decline 
somewhat in 2025 and 2026. An excessive deficit procedure has been in place for Malta since 
July 2024.  

•  The  financial  sector  remains  sound  overall.  The  banking  sector  has  high  levels  of 
capitalisation, and its profitability remained strong in 2024, though below the EU  median. The 
non-performing  loans  ratio  has  been  slightly  declining  and  in  line  with  the  EU  median.    The 
financial  sector  has  a  relatively  high  exposure  to  real  estate.  Sectoral  systemic  risk  buffers 
introduced in 2023 target residential mortgages, enhancing banks' resilience to potential  real 
estate shocks. 

Graph 3.18: Selected graphs, Malta 

Source: Eurostat and European Commission forecasts and calculations. 

80 

4060801001201401601802000809101112131415161718192021222324252008 = 100a) Deflated house price indexELESFRIEITSIPTDENLMT-4-202468101222232425Annual growth rate (%)b) Adjusted loans to households –EADEFRITESMT  
 
Table 3.18:  Key economic and financial indicators, Malta 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

81 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)8.03.910.66.84.03.8Real GDP per capita (1 year % change)4.32.16.33.91.11.4GDP deflator (1 year % change)2.13.25.23.32.72.2Harmonised index of consumer prices (1 year % change)1.52.55.62.42.42.1Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.22.34.92.12.32.0External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%11.412.85.04.26.15.8Current account balance, balance of payments (% of GDP)-2.4 (1)-1.6 (2)16.78.26.37.14.95.4of which: trade balance (% GDP)20.618.417.718.6of which: income balance (% GDP)-3.8-10.2-11.4-11.5Net international investment position (% of GDP)-35%-81.6 (3)-23.1 (4)82.6106.891.883.986.086.8NENDI - NIIP excluding non-defaultable instruments (% of GDP)85.6128.6140.8130.2Net lending-borrowing (% of GDP)18.69.87.58.6CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)6.114.73.813.69.115.5Nominal unit labour cost index per hour worked (1 year % change)3.14.6-1.74.95.84.0Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)1.4-0.8-0.51.5-0.7-0.2Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.6-1.14.20.8-0.10.0Export performance against advanced economies (3y % change)-3%3.78.2-10.713.628.817.9Export performance against advanced economies (1 year % change)2.8-3.511.98.44.12.2Core inflation differential vis-à-vis the euro area (pps.)0.20.30.0-0.7-0.1-0.1CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%57.8 (5)57.0 (6)73.076.666.561.060.262.2NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%7.76.36.64.46.410.9Households and housing marketHousehold debt, consolidated (% of GDP)+55%46.1 (5)39.9 (6)52.054.948.146.847.047.4Household debt, consolidated (% of GHDI)84.783.376.171.2Household credit flow, consolidated (% debt stock t-1)+14%10.16.45.08.17.26.9House price index, nominal (1 year % change)+9%5.75.16.26.75.03.0House prices over/undervaluation gap (7)0.0-2.8-9.5-12.9Standardized price-to-income ratio103.299.996.992.6Building permits (m2 per 1000 inh)3698.52552.62167.72283.7GovernmentGeneral government gross debt (% of GDP)60%42.149.647.046.247.047.2General government balance (% of GDP)2.0-7.0-4.4-3.5-3.2-2.8Banking sectorReturn on equity of banks (%)6.12.710.68.4Tier-1 capital ratio banking sector (% risk-weighted assets)20.222.122.222.2Gross non-performing loans, domestic and foreign entities (% gross loans)3.13.02.01.91.9Cost of borrowing for households for house purchase (%)2.72.12.22.11.9Cost of borrowing for NFCs (%)3.83.75.04.84.4Labour marketUnemployment rate (% labour force Y15-74)+10%3.3 (8)4.04.13.53.12.92.8Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp4.63.84.75.03.01.8           forecast 
      
 
3. Country sections 

THE NETHERLANDS 

The current account surplus remains elevated. At the same time, competitiveness indicators reflect 
high  wage  growth.  Private  sector  debt  ratios  remain  high.  After  correcting  in  2023,  house  prices 
rebounded and show signs of overvaluation while credit flows to households have picked up.  

Real GDP growth rebounded to 1.1% in 2024 and is forecast to increase slightly to 1.7% in 2025 
and 1.3% in 2026. Headline inflation decreased in 2024, reaching 3.2%, and is set to stand at 3.0% 
in  2025.  Core  inflation  decreased  significantly  to  3.2%  in  2024,  slightly  above  the  euro  area 
average.  It is  set  to decrease  further  to  2.8% in  2025.  The  unemployment  rate  stood  at  3.7%  in 
2024 and is expected to increase slightly to 3.9% in 2025.  

The scoreboard reading for The Netherlands shows that six indicators were beyond their indicative 
thresholds in 2024, namely the current account surplus, nominal unit labour cost, the real effective 
exchange  rate,  export  performance  against  advanced  economies,  non-financial  corporations  debt, 
and household debt. Relevant developments worth highlighting: 

•  External  sustainability  concerns  remained  in  2024  and  are  related  to  the  high  and  long-
standing  current  account  surplus.  In  2024,  the  current  account  surplus  somewhat  reduced, 
reaching 9.1% of GDP, due to the resilient domestic demand, but still far exceeding the levels 
explained  by  economic  fundamentals.  The  current  account  surplus  is  forecast  to  further 
increase. Following a substantial reduction from a peak of almost 90% of GDP in 2020 to 52% 
in 2023 due to valuation changes, the NIIP has increased to 62.1% of GDP in 2024. It is forecast 
to decrease in 2025, despite the high current account surpluses. 

•  Competitiveness  developments reflect high inflation and exports underperformance. In 2024 
core inflation was slightly higher than the euro area value, but headline was almost 1 pp. above. 
For  2025,  the  positive  gap  is  expected  to  remain.  Last  year,  the  3-year  REER  appreciated  by 
3.3%, with a year-on-year strengthening of 1% on account of nominal exchange rate gains of 
the  euro,  while  the trend continued  stronger  by mid-2025,  also  pushed by  a positive  inflation 
differential.  ULC  increased  strongly  in  2024,  at  close  to  6%,  driven  by  robust  nominal  wage 
growth and stagnating productivity, with a growth of over 18% over the last 3 years. The 3-year 
change in export market share evolved negatively, dropping by almost 5% in 2024.  

•  Although  the  profitability  and  debt  service  capacity  of  the  non-financial  corporate  sector 
remain  robust,  debt  levels  are  elevated  and  bankruptcies  have  increased.  Despite  continued 
deleveraging, the NFC debt-to-GDP ratio stood at 108.6% in 2024, well above the MIP threshold. 
For  the  coming  years,  deleveraging  is  expected  to  decelerate.  Credit  growth  remained  in 
negative territory at -1.4%, while bank loan flows to NFCs started to pick up in recent months. 
Gross  operating  surplus  increased  again  in  2024,  but  so  did  interest  expenses  (which  had 
decreased  until  2024-Q1),  causing  the  interest  coverage  ratio  to  remain  stable.  Bankruptcies 
increased  in  2024  and  the  gap  to  new  business  registrations  widened.  Despite  a  decline,  the 
profit share remained high compared to its long-term average as did unit profit growth, while 
investment activity remained weak.  

•  The household debt ratio decreased in 2024 but remains very high at 93% of GDP (and 140% 
of  GHDI),  far  above  the  MIP  threshold  of  55%.  Deleveraging  was  supported  by  still  elevated 
inflation,  in  spite  of  dynamic  credit  flows.  Credit  flows  accelerated  markedly  in  2024  and  are 
expected to  remain solid going forward. The saving rate remains  almost 1 pp. above its 2019 
level.  Real  consumption  grew  in  line  with  real  compensation  over  2019-24, but  less  than  real 
disposable  income.  The  increase  in  savings  in  2024  was  fully  underpinned  by  an  increase  in 
financial savings, as investment in fixed capital remains slightly below its pre-pandemic level. 

82 

3. Country sections 

•  House prices increased by 8.2% in 2024 but accelerated in the first half of 2025. The price-to-
income  ratio  was  8  pps.  above  the  long-term  average,  suggesting  house  prices  are  elevated 
relative to income. Overvaluation stood at  17%. Building permits increased (534 m² per 1000 
persons  in  2024  when  it  was  464  m²  in  2023),  indicating  some  rise  in  housing  supply.  The 
recent evolution in house prices has been supported by the  rise in incomes that led to a  9.2% 
increase in borrowing capacity in 2024.  

•  Government debt remains limited. Government debt fell further to 43.7% of GDP in 2024. It is 
forecast to increase somewhat in 2025 and 2026. A fiscal deficit of 0.9% of GDP was recorded 
in 2024; the deficit is expected to worsen visibly this year and next, but to remain limited and 
not  surpass  3%  of  GDP.  Government  guarantees  are  significant  on  account  of  support  for 
players  in  the  housing  market,  including  social  housing.  Yields  on  Dutch  long-term  sovereign 
bonds remain one of the lowest in the euro area.  

•  The financial sector is characterised by sound banks and a complex non-banking sector. The 
capitalisation  of  banks  has  been  stable  in  2024  and  attained  the  EU  median.  Profitability 
remained elevated by historical standards also in 2024 but still below the EU median. The non-
performing loans ratio remained very low, but Stage 2 loans increased in 2024. Credit growth 
has been gradually recovering. High exposure of the financial sector, including non-banks, to real 
estate, and particularly to commercial real estate, represents a risk factor. Non-banks, including 
investment funds, face increasing regulatory scrutiny. 

Graph 3.19: Selected graphs: The Netherlands 

Source: Eurostat and European Commission forecasts and calculations. 

83 

-10-50510152020212223242525f26f% of GDPa) Decomposition of external position (current and capital accounts)Goods, fcastServices, fcastGoods excl energyEnergy balanceServices excl travelTravel balancePrimary inc. bal.Second. inc. bal.Current accountNet lending/borrowing0501001502002503003504001112131415161718192021222324% of GDPb) Decomposition of debt by sectorNon-financial corporationsHouseholds (+NPISH)GovernmentPrivate sector      
 
Table 3.19:  Key economic and financial indicators, The Netherlands 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

84 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)2.52.4-0.61.11.71.3Real GDP per capita (1 year % change)1.81.7-1.60.41.20.8GDP deflator (1 year % change)2.33.86.35.73.23.3Harmonised index of consumer prices (1 year % change)1.95.14.13.23.02.5Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.22.86.43.22.82.7External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%7.57.48.88.49.29.3Current account balance, balance of payments (% of GDP)1.0 (1)-0.8 (2)7.97.69.49.19.29.5of which: trade balance (% GDP)10.49.69.911.0of which: income balance (% GDP)-2.5-2.0-0.5-1.9Net international investment position (% of GDP)-35%-94.2 (3)25.1 (4)53.872.152.162.155.260.5NENDI - NIIP excluding non-defaultable instruments (% of GDP)-9.17.013.217.0Net lending-borrowing (% of GDP)7.311.19.28.9CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)3.99.99.818.320.214.4Nominal unit labour cost index per hour worked (1 year % change)2.12.78.66.24.23.4Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)1.33.12.43.3-0.71.5Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.81.11.00.90.50.4Export performance against advanced economies (3y % change)-3%3.24.9-4.7-4.6-2.20.1Export performance against advanced economies (1 year % change)1.51.1-2.2-1.70.40.0Core inflation differential vis-à-vis the euro area (pps.)0.20.81.40.30.40.6CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%76.7 (5)109.0 (6)139.3134.1117.7108.6106.0104.3NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%0.15.3-0.3-1.43.64.4Households and housing marketHousehold debt, consolidated (% of GDP)+55%47.9 (5)70.5 (6)111.7107.396.093.292.491.9Household debt, consolidated (% of GHDI)171.4159.5143.1139.7Household credit flow, consolidated (% debt stock t-1)+14%2.33.61.03.84.04.0House price index, nominal (1 year % change)+9%8.211.9-1.98.29.06.0House prices over/undervaluation gap (7)-4.212.713.317.2Standardized price-to-income ratio94.5109.1106.0108.4Building permits (m2 per 1000 inh)669.4695.0464.3533.5GovernmentGeneral government gross debt (% of GDP)60%51.850.845.843.745.247.9General government balance (% of GDP)1.6-2.0-0.4-0.9-1.9-2.7Banking sectorReturn on equity of banks (%)8.26.410.910.6Tier-1 capital ratio banking sector (% risk-weighted assets)18.919.218.619.3Gross non-performing loans, domestic and foreign entities (% gross loans)1.91.51.31.41.3Cost of borrowing for households for house purchase (%)2.42.03.83.93.4Cost of borrowing for NFCs (%)1.31.24.04.23.2Labour marketUnemployment rate (% labour force Y15-74)+10%3.6 (8)5.14.23.63.73.94.1Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp0.81.22.11.81.00.4           forecast 
      
 
3. Country sections 

AUSTRIA 

Against  the  backdrop  of  persistent  inflationary  pressures,  concerns  about  competitiveness 
developments remain. While the core inflation differential against the euro area has narrowed, unit 
labour costs have continued to grow significantly. While the current account surplus was stable in 
2024, export performance was weak. The government deficit widened in 2024, with further deficits 
set to contribute to increases in the government debt-to-GDP ratio in the coming years.  

Real GDP contracted by 0.7% in 2024 and is forecast  to broadly stagnate in 2025 (0.3%) before 
accelerating in 2026 by 0.9%. Headline inflation decreased strongly to 2.9% in 2024. It rebounded 
and is set to stand at 3.5% in 2025. Core inflation also decreased significantly to 3.9% in 2024. It 
decreased further and is set to stand at 3.1% in 2025, with the core inflation differential against 
the  euro  area  narrowing.  The  unemployment  rate  stood  at  5.2%  in  2024  and  is  expected  to 
increase slightly to 5.6% in 2025.  

The  scoreboard  reading  for  Austria  shows  that  three  indicators  were  beyond  their  indicative 
thresholds  in  2024,  namely  nominal  unit  labour  costs,  export  performance  against  advanced 
economies, and government gross debt. Relevant developments worth highlighting: 

•  External  sustainability  indicators  continue  to  strengthen.  The  current  account  surplus 
remained stable from 1.6% of GDP in 2023 to 1.5% of GDP in 2024, still mainly reflecting the 
weak domestic demand due to the recession. The surplus is forecast to further reduce in 2025. 
The NIIP increased by almost 7 pps. to 23.9% of GDP in 2024, mainly due to valuation effects 
and the current account surplus but is expected to decrease in 2025.  

•  Competitiveness  developments  are  marked  by  high  inflation  and  ULC  growth  and  export 
underperformance. In 2024, both headline and core inflation were above the euro area values 
and  are  expected  to  stay  there  in  2025  as  well.  Last  year,  the  REER  appreciated  slightly  and 
continued the trend in the first half of 2025 as well, pushed mainly by nominal euro gains. The 
3-year  change  in  ULC  cumulated  to  20%  in  2024,  with  an  annual  increase  of  8%  last  year 
alone,  as  productivity  dropped  on  account  of  subdued  economic  activity  while  nominal  wage 
increases were robust to catch up with high past inflation. The 3-year change in export market 
share was negative in 2024, marked by a large in-year drop.  

•  The  profitability  of  the  non-financial  corporate  sector  has  been  low  and  debt  service 
capacity  has  weakened.  In  2024,  NFC  debt-to-GDP  remained  around  70%  while  credit  growth 
decreased slightly to 0.8%. For this year and next, debt-to-GDP is expected to decrease further 
despite  a  mild  increase  in  credit  growth.  In  2024,  economic  activity  has  remained  subdued, 
accompanied  by  low  business  sentiment.  The  interest  coverage  ratio  continued  to  decline 
reaching its lowest level in over two decades in 2024-Q3 but has shown a slight improvement 
since. Profit indicators have further deteriorated from already low levels, with the profit share 
about 10 pps. below its long-term average and negative unit profit growth, but there have been 
signs  of  stabilisation  in  recent  quarters.  NPLs  and  bankruptcies  increased,  albeit  from  a  low 
level, with the share of corporate NPLs reaching 4.4% by the end of the 2024.  

•  The household debt ratio continued to decrease in 2024 reaching 43% of GDP (56% of GHDI), 
a  moderate  level.  Household  borrowing  remained  negative  but  is  expected  to  slowly  recover 
going forward. At 17% of adjusted GHDI in 2024, the saving rate stands solidly above its pre-
pandemic  level  and  its  longer-term  average  since  2000.  Contrary,  investment  in  gross  fixed 
capital formation by households remains slightly below its pre-pandemic level. 

85 

3. Country sections 

•  House prices decreased by 0.4% in 2024 after having fallen by some 3% in 2023. In the first 
half of 2025, the fall in house prices appears to have ended, and house price growth restarted. 
The  price-to-income  ratio  was  16  pps.  above  the  long-term  average,  suggesting  house  prices 
are  slightly  elevated  relative  to  income.  Overvaluation  stood  at  17%  in  2024.  After  a  strong 
decline in  2023,  building permits  reduced  further  in  2024  (from  707 m²  per 1000  persons  in 
2022 to 471 m² in 2023 and 425 m² in 2024), indicating potential supply constraints (54). 

•  Government  debt  is  significant  and  is  increasing  with  the  large  deficits.  Government  debt 
increased to 79.9% of GDP in 2024, which is some 9 pps. above its pre-COVID-19 level, in part 
reflecting the recession of the past two years. Moreover, debt is expected to increase further in 
2025 and 2026. The government deficit increased to 4.7% of GDP in 2024 and is forecast to 
recede slightly to 4.4% in 2025 and 4.1% in 2026. Gross financing needs are  sizeable despite 
an average debt maturity that is the highest in the euro area. Nonetheless, spreads on Austrian 
long-term sovereign bonds compared with the best rate euro area sovereign debt remain limited 
and have narrowed marginally in 2024 and further in 2025. An excessive deficit procedure for 
Austria has been in place since this July. Government guarantees have been among the largest 
in the EU. The fiscal sustainability risks have worsened and are now high in the medium term, 
whereas they were previously assessed as medium (55).  

•  The  financial  sector  remains  stable.  The  Tier  1  capital  ratio  remained  stable  in  2024,  while 
profitability  remained  strong  by  historical  standards,  though  below  the  EU  median.  The  non-
performing loans ratio  kept mildly increasing, while the Stage 2 ratio  decreased but remained 
well above the EU median. The provision of credit, notably mortgages, has further declined. The 
existing exposure of the banking sector to Russia, though decreasing, represents a source of risk. 

Graph 3.20: Selected graphs: Austria 

Source: Eurostat and European Commission forecasts and calculations. 

(54)  EU last decade average stands at around 450 m² per 1000 persons. 

(55)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

86 

-8-6-4-20246816171819202122232425f26fGrowth (%)a) External and domestic demand, contributions to growthConsumptionInvestment (GFCF)Inventories investmentNet exportsReal GDP growth-9-8-7-6-5-4-3-2-10164666870727476788082848616171819202122232425f26f% of GDP% of GDPb) Government debt and balanceGov. debtGov.balance (rhs)     
 
 
Table 3.20:  Key economic and financial indicators, Austria 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

87 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)2.21.2-0.8-0.70.30.9Real GDP per capita (1 year % change)1.60.5-1.6-1.20.00.6GDP deflator (1 year % change)1.43.17.24.13.62.8Harmonised index of consumer prices (1 year % change)1.94.27.72.93.52.4Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.93.17.33.93.12.7External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%1.62.00.70.61.41.3Current account balance, balance of payments (% of GDP)1.2 (1)0.8 (2)1.51.31.61.51.01.5of which: trade balance (% GDP)3.11.01.72.4of which: income balance (% GDP)-1.60.20.0-0.8Net international investment position (% of GDP)-35%-83.0 (3)20.8 (4)7.514.117.523.921.721.9NENDI - NIIP excluding non-defaultable instruments (% of GDP)-4.2-4.6-5.7-1.8Net lending-borrowing (% of GDP)1.31.32.11.3CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)5.09.810.119.621.114.0Nominal unit labour cost index per hour worked (1 year % change)1.82.98.48.03.52.0Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)2.41.51.82.42.21.3Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.70.03.80.70.80.1Export performance against advanced economies (3y % change)-3%1.3-1.3-1.9-4.1-0.4-3.1Export performance against advanced economies (1 year % change)0.6-1.53.3-3.9-1.00.5Core inflation differential vis-à-vis the euro area (pps.)0.81.12.41.10.70.6CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%71.9 (5)72.3 (6)72.776.971.369.567.867.8NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%3.75.41.30.81.64.2Households and housing marketHousehold debt, consolidated (% of GDP)+55%49.6 (5)70.1 (6)49.750.944.642.841.540.8Household debt, consolidated (% of GHDI)69.668.860.655.9Household credit flow, consolidated (% debt stock t-1)+14%2.93.4-1.6-0.40.81.8House price index, nominal (1 year % change)+9%5.710.2-2.9-0.43.02.0House prices over/undervaluation gap (7)9.527.324.016.6Standardized price-to-income ratio112.8130.8124.5115.9Building permits (m2 per 1000 inh)935.6836.4470.9424.9GovernmentGeneral government gross debt (% of GDP)60%74.981.277.879.981.482.8General government balance (% of GDP)0.0-5.8-2.6-4.7-4.4-4.1Banking sectorReturn on equity of banks (%)8.46.711.610.0Tier-1 capital ratio banking sector (% risk-weighted assets)16.117.318.718.6Gross non-performing loans, domestic and foreign entities (% gross loans)2.81.92.22.42.4Cost of borrowing for households for house purchase (%)1.81.53.94.03.4Cost of borrowing for NFCs (%)1.51.64.54.83.7Labour marketUnemployment rate (% labour force Y15-74)+10%5.1 (8)5.35.75.15.25.65.5Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp1.00.11.81.01.00.8           forecast 
   
 
3. Country sections 

POLAND 

While  inflation  has  come  down,  concerns  about  competitiveness  remain.  The  real  effective 
exchange  rate  has  appreciated  significantly  and,  despite  slowing  down,  the  growth  in  unit  labour 
costs  has  remained  high.  At  the  same  time,  Poland  has  gained  export  market  share  against 
advanced economies over the past years but the current account balance is worsening and set to 
get  into  a  small  deficit.  Government  debt  has  continued  to  increase  due  to  large  fiscal  deficits 
which partly reflect defence spending.  

Real GDP growth increased to 3.0% in 2024 and is forecast to increased further to 3.2% in 2025 
and 3.5% in 2026. Headline and core inflation decreased strongly in 2024, reaching 3.7% and 3.9% 
respectively. They decreased further and are set to stand at 3.4% and 2.8% respectively in 2025, 
with the core inflation differential against the euro area hence narrowing from 1.1 pps. in 2024 to 
0.3  pps.  in  2025.  The  unemployment  rate  stood  at  2.9%  in  2024  and  is  expected  to  increase 
slightly to 3.1% in 2025.  

The  scoreboard  reading  for  Poland  shows  that  three  indicators  were  beyond  their  indicative 
thresholds in 2024, namely the real effective exchange rate, nominal unit labour costs, and house 
prices. Relevant developments worth highlighting: 

•  External sustainability indicators remained close to balance in 2024. The current account was 
balanced in 2024, decreasing from a surplus of 1.6% in 2023 and is expected to be in deficit in 
2025  and  2026.  The  NIIP  increased  in  2024,  reaching  -28.3%  of GDP, mainly  due to  nominal 
growth  and  valuation  effects,  and  remains  close  to  these  levels.  The  NIIP  excluding  non-
defaultable instruments (NENDI) remained positive at 7% of GDP in 2024.  

•  Competitiveness concerns remain. In 2024, headline and core inflation were close to 4%, and 
while in 2025 the core inflation is expected to decelerate, headline inflation is not set to change 
substantially. The REER appreciated by almost 18% over 2021-2024 cumulatively, with a gain 
of 7% in 2024 alone. It was pushed mainly by a strong zloty, marking the highest appreciation 
in the EU. By mid-2025, the REER continued appreciating, albeit at a slower pace. Despite robust 
productivity gains, ULC increased by 6% in 2024, on account of the double digits nominal wage 
growth. ULC change reached 31% over 2021-2024 cumulatively. As productivity is set to remain 
strong  and  nominal  wage  increases  to  moderate  sightly,  ULC  are  projected  to  grow  by  5%  in 
2025.  In  terms  of  export  market  share  against  advanced  economies,  Poland  continues  to 
perform strongly.  

•  A high and increasing share of NPLs points to some weakness in the non-financial corporate 
sector despite low indebtedness and sound profitability. The NFC debt-to-GDP ratio decreased 
slightly to 31.2% and is expected to hover around 30% over the next 1-2 years. Credit growth 
stood at 5.6% and bank loan flows to NFCs have been increasing since mid-2023. The interest 
coverage  ratio  decreased  further  in  2024  but  remained  high  compared  to  other  EU  countries. 
The  share  of  NPLs  to  the NFC  sector  increased  considerably in  2024  from  5%  in  2024-Q1 to 
6.2%  in  2024-Q4  and  is now  among  the  highest  in  the  EU  while  bankruptcies  stayed  broadly 
unchanged. The profit share dropped sharply in 2023 but was back to about its pre-pandemic 
level by the end of 2024. Activity and sentiment indicators remained muted.  

•  The already low household debt ratio continued to decline in 2024, though at a slower speed, 
and reached 23% of GDP (31% of GHDI). Net credit flows remained sluggish in a context of still 
high borrowing costs. After a substantial drop over 2022-23 associated with high inflation, the 
saving  rate  rebounded  strongly  in  2024.  NPLs  to  households  continue  to  decline  but  are  still 
significant at around 3.5% of all bank loans to households in 2024. 

88 

3. Country sections 

•  House prices increased by 15.0% in 2024 but were decelerating in the first half of 2025. The 
price-to-income  ratio  was  11  pps.  below  its  long-term  average,  but  it  takes  11.8  years  of 
income to buy a 100m² apartment, while the long-term EU median is 8 years, suggesting house 
prices  are  high  relative  to  average  income.  Overvaluation  stood  at  2%.  Building  permits  were 
relatively  high  (637  m²  per  1000  persons,  compared  to  the  long-term  EU  average  of  around 
450 m² per 1000 persons), indicating a dynamic housing supply. The recent evolution in house 
prices has been supported by the decrease in interest rates combined with rising incomes that 
led to a strong increase in borrowing capacity in 2024 (+20.8%).  

•  Government debt remains moderate but is increasing fast, driven by continued high deficits. 
Debt increased to 55.1% of GDP in 2024, which is some 10 pps. above its pre-COVID-19 level. 
Moreover, it is forecast to increase again in 2025 and 2026. The fiscal deficit increased to 6.5% 
of GDP in 2024 and is forecast to remain high this year and next. Gross financing needs have 
been  rising  and  have  become  sizeable,  and  above  the  EU  average,  on  account  of  those  large 
deficits  and  an  average  debt  maturity  that  is  one  of  the  lowest  in  the  EU.  Yields  on  Polish 
sovereign  long-term  bonds  declined  in  comparison  with  the  best  rated  sovereign  debt  in  the 
course of 2025. Interest expenditure has been clearly rising. A significant, albeit stable, share of 
government debt is denominated in foreign currencies. An excessive deficit procedure for Poland 
has  been  in  place  since  July  2024.  The  fiscal  sustainability  risks  have  worsened  and  are  now 
high in the medium term, whereas they were previously assessed to be medium (56). 

•  The financial sector remains stable. Profitability and capital ratio of banks remained strong in 
2024 and are close the EU median. The future profitability of banks is still subject to legal risks 
related to previously granted  foreign currency mortgages. The NPLs ratio slightly decreased in 
2024 but at 3.9% is the highest in the EU. Credit dynamics showed signs of recovery in 2024, 
especially  for  the  corporate  sector.  Polish  banks’  exposure  to  domestic  sovereign  debt  is 
significant and among the highest in the EU, which represents a potential source of risk. 

Graph 3.21: Selected graphs, Poland 

Source: Eurostat and European Commission forecasts and calculations. 

(56)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

89 

-10-505101520141516171819202122232425f26fPps.a) Decomposition of rate of change of ULCInflation (HICP)Real Compensation/hr.Productivity/hr. (neg. contrib.)ULCULC in EU2740901401902402900809101112131415161718192021222324252008=100b) Nominal house price indexELESFRIEITSIPTDENLPL   
 
 
Table 3.21:  Key economic and financial indicators, Poland 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

90 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)5.33.30.23.03.23.5Real GDP per capita (1 year % change)5.33.50.63.33.53.7GDP deflator (1 year % change)2.06.79.93.83.63.1Harmonised index of consumer prices (1 year % change)1.67.310.93.73.42.9Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)0.96.39.33.92.82.6External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%-1.20.0-0.7-0.10.6-0.1Current account balance, balance of payments (% of GDP)0.1 (1)0.3 (2)-1.2-0.41.60.3-0.1-0.5of which: trade balance (% GDP)2.83.65.94.0of which: income balance (% GDP)-4.0-4.0-4.3-3.7Net international investment position (% of GDP)-35%-59.4 (3)-4.3 (4)-55.0-39.9-31.8-28.3-30.0-28.5NENDI - NIIP excluding non-defaultable instruments (% of GDP)-14.7-0.56.17.0Net lending-borrowing (% of GDP)0.30.51.70.6CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)5.714.125.130.726.914.9Nominal unit labour cost index per hour worked (1 year % change)2.35.513.96.15.03.1Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)-0.20.29.317.517.99.9Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.90.010.67.02.20.6Export performance against advanced economies (3y % change)-3%13.815.97.75.87.11.4Export performance against advanced economies (1 year % change)4.63.87.2-1.01.00.1Core inflation differential vis-à-vis the euro area (pps.)-0.14.24.31.10.40.5CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%68.4 (5)31.7 (6)40.337.632.331.230.830.5NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%4.85.63.15.68.17.8Households and housing marketHousehold debt, consolidated (% of GDP)+55%45.1 (5)21.7 (6)34.530.823.622.721.921.2Household debt, consolidated (% of GHDI)48.143.333.631.0Household credit flow, consolidated (% debt stock t-1)+14%5.70.9-0.23.33.33.3House price index, nominal (1 year % change)+9%6.410.58.815.06.05.0House prices over/undervaluation gap (7)-11.4-3.4-4.61.9Standardized price-to-income ratio86.289.786.789.3Building permits (m2 per 1000 inh)621.8743.0539.5636.9GovernmentGeneral government gross debt (% of GDP)60%47.952.849.555.159.564.9General government balance (% of GDP)-0.8-4.0-5.2-6.5-6.8-6.3Banking sectorReturn on equity of banks (%)6.95.111.614.6Tier-1 capital ratio banking sector (% risk-weighted assets)16.116.618.118.1Gross non-performing loans, domestic and foreign entities (% gross loans)6.35.14.13.93.9Cost of borrowing for households for house purchase (%)4.44.88.37.77.1Cost of borrowing for NFCs (%)3.64.28.77.77.4Labour marketUnemployment rate (% labour force Y15-74)+10%2.9 (8)4.13.22.82.93.13.1Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp2.42.84.31.8           forecast 
      
 
3. Country sections 

PORTUGAL 

External sustainability has improved further while public and private debt ratios have continued to 
decrease. Following a rebound in 2023, the current account has strengthened further in 2024, and 
external indebtedness has declined. The government debt-to-GDP ratio has fallen further and is set 
to continue decreasing, with the government budget recording a surplus in 2024, and expected to 
remain close to balance in the coming years. House prices remain overvalued as house price growth 
accelerated in nominal and real terms.  

Real GDP growth stood at 2.1% in 2024 and is forecast at 1.9% in 2025, before increasing to 2.2% 
in 2026. Headline and core inflation decreased in 2024, both reaching 2.7%. They have decreased 
further since and are set to reach 2.2% and 2.3% in 2025 respectively, almost in line with the euro 
area  averages.  The  unemployment  rate  stood  at  6.5%  in  2024  and  is  expected  to  marginally 
decrease in 2025, to 6.3%.  

The  scoreboard  reading  for  Portugal  shows  that  four  indicators  were  beyond  their  indicative 
thresholds  in  2024,  namely  the  net  international  investment  position,  nominal  unit  labour  cost 
growth, house prices, and government debt. Relevant developments worth highlighting: 

•  External  sustainability  continues  to  improve.  The  current  account  surplus  further  increased 
from 0.5% of GDP in 2023 to 2.1% in 2024, mainly due to larger net exports of services and a 
reduction in the primary income deficit. The surplus is forecast to somewhat reduce in 2025. The 
NIIP  continued  to  increase  from  -72.3%  in  2023  to  -58.3%  in  2024,  mainly  due  to  valuation 
effects and nominal growth, and a further increase is expected for 2025.  

•  Competitiveness challenges remain contained. The REER stayed flat in 2024 and was broadly 
stable by mid-2025, despite the strong euro. In spite of sizeable productivity gains, ULC rose by 
close  to  6%  in  2024  as  nominal  wage  growth  was  strong,  but  they  are  set  to  decelerate  in 
2025. Over the last three years, nominal ULC per hour grew by almost 18%, exceeding the MIP 
threshold  of  9%.  At  17%  in  2024,  the  3-year  change  in  export  market  share  is  one  of  the 
highest in the EU.  

•  The non-financial corporate debt-to-GDP ratio continued to fall reaching 66.3% in 2024 and 
is  expected  to  stay  around  65%  in  the  coming  years.  Credit  growth  increased  but,  at  1.9%, 
remained subdued. Bank loan flows to NFCs been have increasing since the beginning of 2025 
suggesting  that  credit  growth  will  pick  up  in  2025.  Debt  service  capacity  declined  in  2024  as 
savings  fell  and  the  interest  coverage  ratio  decreased  further.  Despite  comparatively  weak 
activity  and  a  slight  deterioration  in  profit  indicators,  real  investment  growth  turned  positive 
again in 2024.  

•  The  household  debt  ratio  continued  to  decline  in  2024,  though  at  a  slower  speed  than  in 
previous years, and reached 53% of GDP (66% of GHDI), just below the MIP threshold of 55% of 
GDP,  and  16  pps.  less  than  four  years  ago.  Net  credit  flows  recovered  dynamically  but  their 
impact on the debt ratio was cushioned by  still elevated inflation. With inflation coming down 
and net credit flows continuing to grow, the debt ratio is likely to rebound somewhat as of 2025. 

•  House prices increased by 9.1% in 2024 and accelerated further in the first half of 2025. The 
price-to-income  ratio  was  25  pps.  above  the  long-term  average,  suggesting  house  prices  are 
becoming elevated relative to income. Overvaluation stood at 23%. Building permits were high 

91 

3. Country sections 

(655 m² per 1000 persons), indicating that housing supply is dynamic (57). The recent evolution 
in  house  prices  has  been  supported  by  the  decrease  in  interest  rates  combined  with  rising 
incomes that led to a 11.6% increase in borrowing capacity in 2024, as well as tourism-related 
demand for short-term rents. Looking ahead, as interest rates decline and incomes are expected 
to rise, borrowing capacity is likely to strengthen, making credit-financed home purchases more 
accessible and potentially supporting further house price growth. 

•  Government debt is high but declining. Government debt fell further to 93.6% of GDP in 2024, 
which is  some  23  pps.  below  its  pre-COVID-19  level.  Government  debt is  forecast  to continue 
declining  in  2025  and  2026.  A  budget  surplus  of  0.5%  of  GDP  was  recorded  in  2024  and  a 
balanced  budget  is  forecast  for  2025.  Spreads  on  Portuguese  long-term  sovereign  bonds 
compared with the best rated euro area sovereign debt have been overall stable and contained 
in  2025,  after  declining  in  previous  years  amid  a  series  of  upgrades  by  major  credit  rating 
agencies.  Gross  financing  needs  are  limited.  Fiscal  sustainability  risks  are  now  medium  in  the 
medium term, whereas they were previously assessed to be high (58). 

•  The financial sector developed positively in 2024, while some moderate vulnerabilities remain. 
Banks’ capital ratio and profitability attained the EU median in 2024. The non-performing loans 
ratio  keeps  declining  but  remains  slightly  above  the  EU  median,  as  do  Stage  2  loans.  Credit 
dynamics  remained  moderate  in  2024  while  growth  picked  up in  the  first  half  of  2025.  Risks 
associated with financial and public sector feedback loops have further decreased.  

Graph 3.22: Selected graphs, Portugal 

Source: Eurostat, ECB and European Commission calculations 

(57)  EU last decade average stands at around 450 m² per 1000 persons. 

(58)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

92 

0123456-10-505101520251516171819202122232425%%a) Housing marketHouse price (y-o-y growth rate, lhs)Loans for house purchase (y-o-y growth rate, lhs)Interest rate (rhs)0501001502002503003501112131415161718192021222324% of GDPb) Decomposition of debt by sectorGovernmentHouseholds (+NPISH)Non-financial corporationsPrivate sector   
 
 
Table 3.22:  Key economic and financial indicators, Portugal 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

93 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)3.01.23.12.11.92.2Real GDP per capita (1 year % change)3.00.82.01.01.21.6GDP deflator (1 year % change)1.73.17.54.83.22.8Harmonised index of consumer prices (1 year % change)1.02.95.32.72.22.0Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)0.81.65.42.72.32.1External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%1.1-0.3-0.70.21.31.5Current account balance, balance of payments (% of GDP)-1.2 (1)1.1 (2)1.0-1.10.52.11.21.2of which: trade balance (% GDP)1.2-2.11.52.3of which: income balance (% GDP)-0.21.0-1.0-0.2Net international investment position (% of GDP)-35%-56.9 (3)-14.4 (4)-105.5-92.9-72.3-58.3-54.9-50.3NENDI - NIIP excluding non-defaultable instruments (% of GDP)-52.9-35.6-18.7-9.1Net lending-borrowing (% of GDP)2.00.12.03.1CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)6.513.212.517.820.513.9Nominal unit labour cost index per hour worked (1 year % change)2.93.88.65.84.92.6Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)0.8-1.9-1.40.6-0.3-0.2Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.0-0.92.20.3-0.30.0Export performance against advanced economies (3y % change)-3%6.5-5.817.017.311.35.4Export performance against advanced economies (1 year % change)2.3-0.67.81.70.80.7Core inflation differential vis-à-vis the euro area (pps.)-0.2-0.40.4-0.1-0.20.0CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%53.8 (5)58.8 (6)88.186.370.066.365.464.8NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%-0.83.30.21.94.54.9Households and housing marketHousehold debt, consolidated (% of GDP)+55%33.6 (5)31.0 (6)65.664.954.152.553.755.2Household debt, consolidated (% of GHDI)84.079.769.965.9Household credit flow, consolidated (% debt stock t-1)+14%0.92.9-0.44.07.48.1House price index, nominal (1 year % change)+9%9.810.38.29.116.09.0House prices over/undervaluation gap (7)-5.212.821.523.0Standardized price-to-income ratio100.0119.1124.6124.6Building permits (m2 per 1000 inh)438.3588.4633.4654.5GovernmentGeneral government gross debt (% of GDP)60%121.1123.196.993.691.389.2General government balance (% of GDP)-1.1-3.01.30.50.0-0.3Banking sectorReturn on equity of banks (%)2.14.513.814.4Tier-1 capital ratio banking sector (% risk-weighted assets)14.516.417.919.0Gross non-performing loans, domestic and foreign entities (% gross loans)9.63.82.72.42.3Cost of borrowing for households for house purchase (%)1.51.24.13.93.0Cost of borrowing for NFCs (%)2.62.35.45.34.0Labour marketUnemployment rate (% labour force Y15-74)+10%5.9 (8)7.76.76.56.56.36.2Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp2.10.54.03.22.61.7           forecast 
      
 
3. Country sections 

ROMANIA 

Risks  related  to  external  sustainability  and  competitiveness  remain.  Large  fiscal  deficits  have 
fuelled  domestic  demand  and  contributed  to  large  current  account  deficits.  Core  inflation  has 
remained elevated, and the real effective exchange rate has appreciated further. With high wage 
increases,  Romania  recorded  the  highest  increase  in  unit  labour  costs  in  the  EU  in  2024.  At  the 
same time, external indebtedness has remained stable against the backdrop of strong nominal GDP 
growth. 

Real GDP growth stood at 0.9% in 2024 and is forecast to remain subdued, at 0.7% in 2025 and 
1.1% in 2026. Headline inflation decreased to 5.8% in 2024. It has rebounded and is set to stand 
at  6.7%  in  2025.  While  decreasing,  core  inflation  remained  elevated  in  2024,  at  8.4%.  It  has 
decreased  further  and  is  forecast  to  stand  at  6.5%  in  2025,  with  the  core  inflation  differential 
against the euro area remaining high but narrowing from 5.5 pps. in 2024 to 4.1 pps. in 2025. The 
unemployment  rate  stood  at  5.4%  in  2024  and  is  expected  to  increase  moderately  to  6.1%  in 
2025.  

The  scoreboard  reading  for  Romania  shows  that  three  indicators  were  beyond  their  indicative 
thresholds in  2024,  namely  the  net international  investment  position, the  current  account  deficit, 
and nominal unit labour costs. Relevant developments worth highlighting: 

•  Large  current  account  deficits  raise  concerns  about  external  sustainability.  Large  fiscal 
deficits  have  fuelled  domestic  demand  growth  in  recent  years,  resulting  in  sizeable  current 
account deficits, which markedly exceeded estimated current account benchmarks. The current 
account deficit remained substantial and increased to 8.2% in 2024, up from 6.7% in 2023. The 
deficit  is  forecast  to  improve  as  import-heavy  private  consumption  is  set  to  decelerate 
significantly in 2025 and 2026 due to sizeable fiscal consolidation measures. A growing cost of 
government  debt  adds  to  the  primary  income  deficit.  Large  fiscal  deficits  keep  the  economy 
heavily  reliant  on  external  financing.  Capital  transfers  from  the  EU,  including  the  RRF,  and 
foreign direct investment covered slightly more than half of external financing needs in 2024. 
Substantial  foreign  exchange  reserves  and  EU  funds  inflows  mitigate  the  immediate  risks  of 
liquidity  drying  out.  The  net  international  investment  position  (NIIP),  which  stood  at  close 
to  -41%  of  GDP  in  2024,  remains  broadly  stable,  owing  to  strong  nominal  growth.  The  NIIP 
seems  unlikely  to  improve  substantially,  as  nominal  growth  is  slowing  down  and  external 
is  dominated  by 
financing  needs  remain  substantial.  The  composition  of  the  NIIP 
non-defaultable instruments, notably FDI. 

•  Competitiveness  concerns  persist  due  to  significant  inflation  differentials  and  high  wage 
increases,  which  are  however  moderating  markedly.  In  2024  both  headline  and  core  inflation 
were the highest in the EU. In 2025 they are set to remain high, on account of the phasing-out 
of energy support measures and VAT and excise duty increases. Last year, the REER appreciated 
by  close  to  3%;  both  the  nominal  appreciation  of  the  Romanian  leu  and  positive  inflation 
differentials contributed. By mid-2025 the REER continued to appreciate, albeit at a slower pace. 
ULC  increased  by  18%  in  2024  (the  highest  annual  increase  in  the  EU),  as  nominal  wage 
increases  were  strong  and  productivity  decreased,  pushing  the  3-year  increase  to  more  than 
50%.  The  3-year  change  in  export  market  share  remained  positive  in  2024,  although  in-year 
losses were registered.  

•  Despite some weaknesses in economic activity, the non-financial corporate sector remained 
robust  with  low  leverage  and  comparatively  favourable  financing  conditions.  NFC  debt  stayed 
relatively constant at close to 28% of GDP, the lowest level in the EU and is expected to mildly 
decrease in the  next  years.  In  2024 credit growth  decreased  slightly  to  10.1%.  Although  bank 

94 

3. Country sections 

loan  flows  to  NFCs  have  decelerated  in  recent  months,  they  have  remained  strong,  indicating 
that  credit  growth  is  likely  to  remain  robust  in  2025.  The  share  of  NPLs  increased  mildly 
throughout  2024,  while  bankruptcies  stayed  broadly  unchanged.  Activity  indicators  have 
remained below their long-term averages.  

•  The household debt ratio remained stable at around 13% of GDP (19% of GHDI) in 2024, the 
lowest level in the EU. Net  credit flows recovered strongly to 11% of the previous year’s debt 
stock in 2024, not far away from the MIP threshold of 14%. As a proportion of GDP, however, 
their magnitude remains small and for the time being insufficient to push the debt ratio upward 
in  a  context  of  still  high  inflation.  According  to  the  non-financial  sectoral  accounts  data,  the 
gross saving rate has been  negative for the last 18 years (with the exception of 2020 due to 
forced saving) (59). It improved to -1% in 2024 after two years of high inflation, but remains a 
concern  for  the  resilience  of  the  household  sector.  While  non-financial  saving  (mostly 
investment in homes) is around the EU average, at around 10% of GHDI, financial savings are 
consistently and significantly negative. Non-performing loans to households continue to decline 
but are still significant at around 3.5% of all bank loans to households in 2024. 

•  House prices increased by 5% in 2024 and continued to grow at a similar pace into 2025. The 
price-to-income ratio was 53 pps. below the long-term average. Undervaluation stood at 26%. 
Building permits were low (462 m² per 1000 persons), indicating limited increases in supply. The 
recent evolution in house prices has been supported by the decrease in interest rates combined 
with rising incomes that led to a strong increase in borrowing capacity in 2024 (+28%).  

•  Government  debt  remains  moderate  but  is  increasing  fast  as  fiscal  deficits  have  been  very 
high recently. Debt increased further to 54.8% of GDP in 2024, which is some 20 pps. above its 
pre-COVID-19 level, and government debt is forecast to increase further in 2025 and 2026. The 
government deficit rose to 9.3% of GDP in 2024 and is forecast to decline gradually to about 
6%  in  2026  due  to  several  fiscal  adjustment  packages.  Gross  financing  needs  continue  being 
sizeable and above the EU average. Romanian long-term sovereign bond yields are the highest 
in  the  EU  and  spreads  against  the  best  rated  sovereign  debt  of  the  EU  increased  in  2025, 
especially  around  the  election  period.  Interest  expenditure  has  been  rising  too,  doubling  to 
around 3% of GDP in 2025 from a few years ago. A very significant share of government debt 
is  denominated  in  foreign  currencies  (over  half  of  it  in  recent  years).  An  excessive  deficit 
procedure for Romania has been ongoing since 2020. Short-term fiscal sustainability risks have 
worsened and are now high, whereas they were previously assessed as being low, and remain 
high in the medium term (60).  

•  The  financial sector  is  stable but  subject to  moderate  risks in  specific  asset  categories.  The 
Tier  1  capital  ratio  and  profitability  remained  strong  in  2024,  well  above  the  EU  median.  The 
non-performing loans ratio of the banking sector remained stable in 2024, and 2.7% above the 
EU  median.  Credit  growth  rates  remained  high  in  2024  but  decelerated  in  2025.  Romanian 
banks’ exposure to domestic sovereign debt is rather significant and the highest in the EU, partly 
due to shallow financial markets, and has increased in recent years. This represents a risk factor 
in face of increasing government indebtedness. 

(59)  Household statistics might be distorted by measurement issues, as data from the financial transactions accounts imply a 

positive gross savings ratio since 2009. 

(60)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

95 

 
Graph 3.23: Selected graphs, Romania 

3. Country sections 

Source: Eurostat and European Commission forecasts and calculations. 

Table 3.23:  Key economic and financial indicators, Romania 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

96 

-20-1001020212223242525f26f% of GDPa) Decomposition of external position (current and capital accounts)Goods, fcastServices, fcastGoods excl energyEnergy balanceServices excl travelTravel balancePrimary inc. bal.Second. inc. bal.Current accountNet lending/borrowing-100102030141516171819202122232425f26fPps.b) Decomposition of rate of change of ULC Inflation (HICP)Real Compensation/hr.Productivity/hr. (neg. contrib.)ULCULC in EU27averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)5.92.02.30.90.71.1Real GDP per capita (1 year % change)6.42.62.21.00.91.2GDP deflator (1 year % change)6.07.212.49.67.86.8Harmonised index of consumer prices (1 year % change)3.06.19.75.86.75.9Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.83.79.78.46.55.6External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%-3.2-6.0-7.8-8.1-7.5-7.4Current account balance, balance of payments (% of GDP)-0.2 (1)-1.3 (2)-4.2-7.3-6.7-8.2-7.7-6.2of which: trade balance (% GDP)-3.4-5.7-4.9-6.0of which: income balance (% GDP)-0.8-1.6-1.8-2.2Net international investment position (% of GDP)-35%-54.3 (3)-8.0 (4)-46.7-46.2-41.6-41.3-45.7-47.3NENDI - NIIP excluding non-defaultable instruments (% of GDP)-6.2-7.1-6.5-8.4Net lending-borrowing (% of GDP)-3.0-5.3-3.9-6.7CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)24.118.930.251.045.231.1Nominal unit labour cost index per hour worked (1 year % change)7.66.115.918.06.14.6Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)-2.02.46.89.78.28.2Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.10.95.52.72.62.8Export performance against advanced economies (3y % change)-3%11.55.36.82.04.23.0Export performance against advanced economies (1 year % change)3.01.25.4-2.63.83.6Core inflation differential vis-à-vis the euro area (pps.)0.71.74.75.54.13.4CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%66.0 (5)26.1 (6)32.731.428.427.727.026.4NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%2.110.211.610.19.28.7Households and housing marketHousehold debt, consolidated (% of GDP)+55%51.3 (5)15.9 (6)15.815.312.712.512.813.1Household debt, consolidated (% of GHDI)24.322.819.518.5Household credit flow, consolidated (% debt stock t-1)+14%7.75.84.310.911.010.6House price index, nominal (1 year % change)+9%5.05.43.35.05.05.0House prices over/undervaluation gap (7)-7.7-12.9-20.9-25.9Standardized price-to-income ratio69.960.351.447.1Building permits (m2 per 1000 inh)542.3591.6456.3461.8GovernmentGeneral government gross debt (% of GDP)60%35.047.949.354.859.161.1General government balance (% of GDP)-3.2-7.7-6.7-9.3-8.4-6.2Banking sectorReturn on equity of banks (%)12.512.616.817.7Tier-1 capital ratio banking sector (% risk-weighted assets)18.120.519.920.9Gross non-performing loans, domestic and foreign entities (% gross loans)5.33.42.52.62.7Cost of borrowing for households for house purchase (%)4.94.87.36.45.9Cost of borrowing for NFCs (%)5.45.79.08.29.0Labour marketUnemployment rate (% labour force Y15-74)+10%5.7 (8)5.45.85.65.46.15.8Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp2.93.02.71.80.20.1           forecast   
 
 
      
 
3. Country sections 

SLOVENIA 

With  inflation  coming down,  competitiveness  concerns  have  reduced.  The  real  effective exchange 
rate  depreciated  slightly  in  2024,  and  unit  labour  costs  slowed  down  despite  still  high  nominal 
wage increases. External sustainability remains strong, with the current account recording a surplus 
of 4.5% of GDP in 2024. The government deficit narrowed in 2024, and government debt is set to 
decrease in the next years. 

Real  GDP  growth  stood  at  1.7%  in  2024  and  is  forecast  to  decrease  to  1.0%  in  2025  before 
rebounding to 2.4% in 2026. Headline and core inflation decreased significantly in 2024, to 2.0% 
and  2.9%  respectively.  Headline  inflation  rebounded  slightly  and  is  forecast  to  stand  at  2.5%  in 
2025  while  core  inflation  is  set  to  stand  at  2.4%,  in  line  with  the  euro  area  average.  The 
unemployment rate stood at 3.7% in 2024 and is expected to decrease to 3.4% in 2025.  

The  scoreboard  reading  for  Slovenia  shows  that  two  indicators  were  beyond  their  indicative 
thresholds  in  2024,  namely  nominal  unit 
labour  costs  and  government  debt.  Relevant 
developments worth highlighting: 

•  External sustainability continues to be strong. The current account surplus reached 4.5% of 
GDP  in  2024,  from  4.8%  in  2023,  and  is  forecast  to  somewhat  reduce.  The  NIIP  further 
improved, reaching 9.9% of GDP in 2024, from 3.6% in 2023, mainly due to the current account 
surplus. The NIIP excluding non-defaultable instruments (NENDI) remains positive, reaching 23% 
of GDP in 2024.  

•  Competitiveness  indicators  remain  contained.  In  2024,  both  average  headline  and  core 
inflation rates evolved broadly in line with those in the euro area and are expected to do so in 
2025  as  well.  Last  year,  the  REER  depreciated  slightly,  as  the  inflation  differential  more  than 
offset the nominal exchange rate gains. By mid-2025 the REER continued to depreciate, mainly 
on  account  of  negative  inflation  differentials  against  main  trading  partners.  ULC  increased  by 
5.3% last year, driven by marginal productivity losses and robust nominal wage increases, and 
by  more  than  20%  over  the  last  3  years.  In  2025,  nominal  wages  growth  is  expected  to 
accelerate and despite a pick-up in productivity, ULC is set to increase by 6%. The 3-year change 
in export market performance against advanced economies turned slightly negative in 2024.  

•  The  non-financial  corporate  sector  has  stayed  solid  with  little  change  from  the  previous 
year, featuring low leverage and robust debt service capacity, though borrowing and investment 
have been lacklustre. The debt-to-GDP ratio  declined slightly to 32.3% where it is expected to 
remain over the coming years. Credit growth stood at -2.7% in 2024. Bank loan flows to NFCs 
increased modestly and turned positive in the beginning of 2025. The interest coverage ratio fell 
further in 2024 but remained high compared to other EU countries. The share of NPLs stayed at 
below 3% in 2024, while real investment growth turned negative.  

•  Household balance sheets look healthy overall. The household debt ratio rebounded slightly in 
2024  to  just  above  24%  of  GDP  (34%  of  GHDI),  still  a  low  level.  Credit  flows  recovered 
dynamically  after  a  mild  deceleration  on  the  back  of  high  borrowing  costs.  If  continued  at  a 
similar  rate,  they  might  gradually  push  up  the  household  debt  ratio  over  the  coming  years. 
Households’ saving rate is solid at around 13%, in line with its pre-pandemic level, and more or 
less equally split between financial and non-financial savings. 

•  House prices increased by 7.5% in 2024, but showed signs of deceleration in the first half of 
2025.  The  price-to-income  ratio  was  7  pps.  above  the  long-term  average,  suggesting  house 
prices are slightly elevated relative to income and overvaluation stood at 6%. Building permits 

97 

3. Country sections 

were relatively low (423 m² per 1000 persons), indicating potential supply constraints  (61). The 
recent evolution in house prices has been supported by the decrease in interest rates that led to 
a 13.6% increase in borrowing capacity in 2024.  

•  Government debt is moderate and is declining. Government debt decreased to 66.6% of GDP 
in 2024, which is around its pre-COVID-19 level. Debt is forecast to continue decreasing in 2025 
and  2026.  The  government  deficit  fell  further  to  0.9%  of  GDP  in  2024  and  it  is  forecast  to 
widen marginally this year and next but to be just over 2% of GDP. Spreads on Slovenian long-
term  sovereign  bonds  compared  with  the  best  rated  euro  area  sovereign  debt  have  narrowed 
further in 2024 and 2025. Fiscal sustainability risks remain medium in the medium term (62). 

•  The  soundness  of  the  financial  sector  reflects  high  banking  sector  capitalisation  and 
profitability in 2024, which are close to the EU median. The non-performing loans ratio slightly 
increased in 2024 but at 1.7% is below the EU median. There has been also a mild increase in 
Stage  2  loans.  After  a  previous  strong  decline,  credit  started  to  recover  in  late  in  2024.  The 
increase in house prices in recent years that represents a source of risk seems to have some to 
an end in 2024. 

Graph 3.24: Selected graphs, Slovenia 

Source: Eurostat and European Commission forecasts and calculations. 

(61)  EU last decade average stands at around 450 m² per 1000 persons. 

(62)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

98 

-9-8-7-6-5-4-3-2-1012010203040506070809016171819202122232425f26f% of GDP% of GDPb) Government debt and balanceGov. debtGov.balance (rhs)-10-5051015141516171819202122232425f26fPps.a) Decomposition of rate of change of ULC Inflation (HICP)Real Compensation/hr.Productivity/hr. (neg. contrib.)ULCULC in EU27     
 
 
Table 3.24:  Key economic and financial indicators, Slovenia 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

99 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)4.42.22.41.71.02.4Real GDP per capita (1 year % change)4.01.91.81.40.72.2GDP deflator (1 year % change)1.93.410.03.53.82.7Harmonised index of consumer prices (1 year % change)1.73.67.22.02.52.3Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.22.56.72.92.42.2External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%6.15.32.42.84.03.4Current account balance, balance of payments (% of GDP)0.5 (1)0.8 (2)6.63.34.84.52.92.8of which: trade balance (% GDP)8.85.56.66.1of which: income balance (% GDP)-2.2-2.2-1.8-1.6Net international investment position (% of GDP)-35%-65.1 (3)4.3 (4)-20.0-7.53.69.911.011.0NENDI - NIIP excluding non-defaultable instruments (% of GDP)-3.39.519.323.0Net lending-borrowing (% of GDP)6.03.24.84.6CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)5.613.514.820.420.715.7Nominal unit labour cost index per hour worked (1 year % change)2.54.57.85.36.33.4Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)0.40.01.11.1-0.6-1.0Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.4-0.42.9-0.4-0.30.0Export performance against advanced economies (3y % change)-3%12.23.21.0-0.47.17.2Export performance against advanced economies (1 year % change)3.70.31.7-0.32.01.8Core inflation differential vis-à-vis the euro area (pps.)0.20.51.70.00.00.1CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%60.5 (5)53.1 (6)44.039.834.732.332.532.5NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%-1.24.1-2.9-2.76.56.2Households and housing marketHousehold debt, consolidated (% of GDP)+55%40.6 (5)34.3 (6)27.126.723.924.224.725.3Household debt, consolidated (% of GHDI)38.435.533.333.5Household credit flow, consolidated (% debt stock t-1)+14%6.14.83.96.87.27.4House price index, nominal (1 year % change)+9%7.910.27.27.55.04.0House prices over/undervaluation gap (7)-6.11.93.65.5Standardized price-to-income ratio95.6101.0105.2106.9Building permits (m2 per 1000 inh)353.3443.0471.6423.2GovernmentGeneral government gross debt (% of GDP)60%70.675.968.366.665.263.7General government balance (% of GDP)0.5-5.1-2.6-0.9-2.2-2.3Banking sectorReturn on equity of banks (%)10.011.416.814.9Tier-1 capital ratio banking sector (% risk-weighted assets)17.716.618.017.8Gross non-performing loans, domestic and foreign entities (% gross loans)6.22.31.51.61.7Cost of borrowing for households for house purchase (%)2.42.14.13.62.9Cost of borrowing for NFCs (%)2.12.04.95.14.0Labour marketUnemployment rate (% labour force Y15-74)+10%5.5 (8)5.44.63.73.73.43.5Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp3.30.81.40.9-0.60.7           forecast 
      
 
3. Country sections 

SLOVAKIA 

Concerns about competitiveness, external sector developments, government debt and the housing 
market persist. Despite a decrease in 2024, inflation rates  remain high, with core inflation set to 
stand  well  above  the  euro  area  average  in  2025.  Export  performance  worsened  and  the  current 
account  deficit  widened  in  2024.  The  current  account  is  set  to  widen  further,  fuelled  by  fiscal 
deficits which also contribute to increases in government debt. House prices have accelerated and 
show signs of overvaluation.  

Real GDP grew by 1.9% in 2024, and real GDP growth is forecast to slow down, to 0.8% in 2025 
and 1.0% in 2026. Headline and core inflation decreased significantly in 2024 (at 3.2% and 4.3% 
respectively), but they rebounded in 2025, due to increases in VAT and other taxes and effects of 
adjustments in energy subsidies, with headline inflation forecast to reach 4.2% and core inflation 
5.4%, implying a widening of the core inflation differential against the euro area from 1.4 pps. in 
2024  to  3.0  pps.  in  2025.  The  unemployment  rate  stood  at  5.3%  in  2024  and  is  expected  to 
increase to 5.4% in 2025.  

The  scoreboard  reading  for  Slovakia  shows  that  five  indicators  were  beyond  their  indicative 
thresholds in  2024,  namely  the  current  account  deficit, the  net international  investment  position, 
real  effective  exchange  rate,  export  performance,  and  nominal  unit  labour  costs.  Relevant 
developments worth highlighting:  

•  Concerns  about  external  sector  developments  persist.  The  current  account  deficit  widened 
from 3% of GDP in 2023 to 4.6% in 2024, significantly exceeding pre-pandemic levels, and is 
largely driven by the fiscal deficit. The current account deficit is forecast to increase further in 
the coming years. Strong nominal growth and valuation effects contributed to the NIIP rising to -
55%  of  GDP  in  2024.  The  NENDI,  which  accounts  for  instruments  that  are  subject  to  lower 
default risks, also experienced a slight increase, reaching around –12% of GDP.  

•  Competitiveness  concerns  persist,  despite  some  moderation.  In  2024,  headline  and  core 
inflation  rates  remained  high  at  3.2%  and  4.3%  respectively.  Both  rates  are  expected  to 
increase in 2025, further widening the gap with the euro area. Last year, the 3-year change in  
REER cumulated to over 8%, while year-on-year it appreciated slightly. By mid-2025, the strong 
euro and positive inflation differentials pushed the REER higher. Despite sizeable nominal wage 
increases,  ULC  growth  moderated  substantially  last  year  due  to  strong  productivity  gains,  but 
cumulated to 23% over the last 3 years. The three-year change in export market  share was  -
4.5% in 2024, marked by a considerable in-year drop.  

• 

In spite of a solid non-financial corporate sector, borrowing and investment have remained 
subdued.  The  NFC  debt-to-GDP  ratio  decreased  further  to  39.2%  in  2024  and  is  expected  to 
remain  roughly  at  this  level  in  the  coming  years.  Credit  growth  remained  muted  in  2024  at  -
1.1% but since the beginning of 2025, bank loan flows to NFCs have started to pick up strongly 
amid  signs  of  easing  credit  standards.  Debt  service  capacity  has  remained  robust,  as  the 
interest coverage ratio increased in 2024 and is one of the highest in the EU. The share of NPLs 
for NFCs remained broadly unchanged at around 2.5% in 2024. Real investment grew by 1.8% 
in 2024.  

•  The household debt ratio decreased slightly in 2024 and stands just above 43% of GDP (59% 
of  GHDI  in  2024),  a  moderate  level.  Net  credit  flows  remained  subdued  in  2024  but  are 
expected to recover in 2025, potentially putting upward pressure on the debt ratio. In 2022, the 
gross saving rate declined as real consumption continued to grow while real disposable income 

100 

3. Country sections 

contracted,  but  it  is  gradually  recovering.  In  2024,  the  gross  saving  rate  stood  at  8%,  still 
somewhat below its pre-pandemic level of 10%.  

•  House prices increased by 3.8% in 2024 and are showing signs of strong acceleration in 2025. 
The  price-to-income  ratio was  6  pps.  below  the  long-term  average,  but  it  takes  14.3  years  of 
income to buy a 100m² apartment, while the long-term EU median is 8 years, suggesting house 
prices  are  high  relative  to  income.  Overvaluation  stood  at  8%.  in  2024  Building  permits  were 
low, at 293.1 m² per 1000 persons, suggesting limited supply increases (63). The recent evolution 
in  house  prices  has  been  supported  by  the  rise  in  incomes  that  led  to  a  6.0%  increase  in 
borrowing capacity in 2024.  

•  Government debt level is still moderate but is increasing as deficits continue to be high. Debt 
increased  to  59.7%  of  GDP  in  2024,  which  is  approximately  12  pps.  above  its  pre-COVID-19 
level.  It  is  forecast  to  increase  further  in  2025  and  2026.  The  government  deficit  increased 
slightly to 5.5% of GDP in 2024 and is forecast to only marginally improve this year and next, 
continuing  to  add  to  debt.  Spreads  on  Slovak  long-term  sovereign  bonds  compared  to  the 
highest-rated  euro  area  sovereign  debt  have  narrowed  slightly  in  2024  and  2025  but  remain 
among  the  highest  in  the  euro  area.  An  excessive  deficit  procedure  for  Slovakia  has  been  in 
place  since  July  2024.  Short-term  fiscal  sustainability  risks  have  worsened  and  are  now  high, 
whereas they were previously assessed to be low, and remain high in the medium term (64).  

•  The financial sector’s remained resilientas banking sector capitalisation has remained stable 
in 2024 but below the EU median. While bank profitability decreased in 2024, it remained high 
compared  to  historical  levels  and  but  below  the  EU  median.  The  non-performing  loans  ratio, 
which had been steadily decreasing from 2016 to 2022, increased slightly in 2023 and 2024, 
reaching 1.9%. Credit continued to slow down, with credit to NFCs contracting slightly in 2024.  

Graph 3.25: Selected graphs, Slovakia 

Source: Eurostat and European Commission forecasts and calculations. 

(63)  EU last decade average stands at around 450 m² per 1000 persons. 

(64)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

101 

-1001020141516171819202122232425f26fPps.b) Decomposition of rate of change of ULC Inflation (HICP)Real Compensation/hr.Productivity/hr. (neg. contrib.)ULCULC in EU27-12-10-8-6-4-202468100910111213141516171819202122232425f26f% of GDPa) Net Lending/Borrowing by Sector -SlovakiaHouseholds and NPISHGeneral governmentCorporationsTotal economy   
 
 
Table 3.25:  Key economic and financial indicators, Slovakia 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

102 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)3.11.12.11.90.81.0Real GDP per capita (1 year % change)2.91.12.11.91.01.2GDP deflator (1 year % change)1.93.910.03.43.83.6Harmonised index of consumer prices (1 year % change)2.25.511.03.24.24.1Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.84.69.54.35.42.6External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%-1.9-3.3-5.8-5.8-4.5-5.5Current account balance, balance of payments (% of GDP)0.3 (1)1.9 (2)-2.3-5.0-3.0-4.6-5.9-6.0of which: trade balance (% GDP)0.7-1.91.5-0.3of which: income balance (% GDP)-3.0-3.1-4.5-4.3Net international investment position (% of GDP)-35%-51.6 (3)-1.0 (4)-67.5-62.3-57.8-55.0-54.6-55.2NENDI - NIIP excluding non-defaultable instruments (% of GDP)-15.2-15.8-15.0-12.4Net lending-borrowing (% of GDP)-1.7-4.0-2.6-3.6CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)11.512.117.323.319.812.5Nominal unit labour cost index per hour worked (1 year % change)4.73.98.85.54.42.2Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)1.04.17.58.35.43.5Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.91.36.10.71.41.7Export performance against advanced economies (3y % change)-3%2.4-0.5-2.3-4.57.44.0Export performance against advanced economies (1 year % change)-0.2-1.45.8-3.93.82.4Core inflation differential vis-à-vis the euro area (pps.)0.82.64.51.43.00.4CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%72.0 (5)45.2 (6)48.447.241.039.239.239.2NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%1.77.1-3.6-1.15.95.7Households and housing marketHousehold debt, consolidated (% of GDP)+55%47.7 (5)29.9 (6)42.146.543.843.344.446.0Household debt, consolidated (% of GHDI)60.763.361.059.2Household credit flow, consolidated (% debt stock t-1)+14%9.88.04.64.37.38.3House price index, nominal (1 year % change)+9%7.59.8-0.23.89.06.0House prices over/undervaluation gap (7)-1.412.811.07.8Standardized price-to-income ratio95.9103.597.093.6Building permits (m2 per 1000 inh)428.4434.1366.5293.1GovernmentGeneral government gross debt (% of GDP)60%49.658.855.859.761.964.0General government balance (% of GDP)-1.1-4.0-5.3-5.5-5.0-4.6Banking sectorReturn on equity of banks (%)9.07.711.510.2Tier-1 capital ratio banking sector (% risk-weighted assets)16.417.918.618.7Gross non-performing loans, domestic and foreign entities (% gross loans)3.32.11.81.92.0Cost of borrowing for households for house purchase (%)1.61.43.84.13.7Cost of borrowing for NFCs (%)2.22.25.35.74.4Labour marketUnemployment rate (% labour force Y15-74)+10%5.9 (8)6.86.55.85.35.55.7Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp1.40.72.02.0           forecast 
      
 
3. Country sections 

FINLAND 

Cost  pressures  have  been  very  limited  in  the  context  of  low  inflation  and  stagnating  economic 
activity.  At  the  same  time,  export  performance  has  been  weak  in  recent  years.  While  remaining 
high,  household  debt  has  decreased  against  the  backdrop  of  contracting  credit  flows.  The 
government deficit widened in 2024 and is set to remain substantial in the next years, contributing 
to increases in government debt in a context of low nominal GDP growth.  

Real GDP growth stood at 0.4% in 2024 and is set to decrease to 0.1% in 2025 before rebounding 
to 0.9% in 2026. Headline inflation decreased to 1.0% in 2024 but has accelerated and is forecast 
to stand at 1.9% in 2025. Core inflation was below the euro area average in 2024, at 2.2%. It has 
increased  mildly  and  is  set  to  stand  at  2.4%  in  2025,  in  line  with  the  euro  area  average.  The 
unemployment rate stood at 8.4% in 2024 and is expected to increase to 9.5% in 2025.  

The  scoreboard  reading  for  Finland  shows  that  four  indicators  were  beyond  their  indicative 
thresholds  in  2024,  namely  export  performance,  nominal  unit  labour  costs,  household  debt,  and 
government debt. Relevant developments worth highlighting: 

•  External sustainability is marked by a slight current account deficit at 0.7% of GDP in 2024, 
which is forecast to widen somewhat. The NIIP increased from 12.9% of GDP in 2023 to 24.7% 
in 2024, mainly on the back of valuation effects, and is forecast to decrease but remain close to 
this level in 2025.  

•  Competitiveness  developments  are  marked  by  low  price  growth  on  the  back  of  long-term 
subdued  activity.  In  2024,  the  REER  depreciated  by  1%  on  account  of  negative  inflation 
differentials  against  trading  partners  and  despite  a  strong  euro.  However,  by  mid-2025  it 
appreciated  slightly.  In  2024,  ULC  growth  was  the  lowest  in  the  EU,  marked  by  low  nominal 
wage increases, but the 3-year change cumulated to almost 11%. Export performance against 
advanced economies was among the weakest in the EU, dropping by close to 8% in the 3 years 
up to 2024.  

•  The  non-financial  corporate  debt  service  capacity  has  remained  weak,  and  borrowing  and 
investment subdued. NFC debt-to-GDP stayed at 78.3% and is expected to slightly decrease in 
the next years. Credit growth fell to 0.9% in 2024 and bank loan flows to NFCs have remained 
subdued. The interest coverage ratio fell to its lowest value in over two decades in 2024-Q1 and 
has  since  remained  among  the  lowest  in  the  EU.  At  the  same  time,  corporate  savings  have 
decreased  considerably.  However,  borrowing  costs  have  started  to  fall  and  with  interest 
expenses  likely  having  peaked,  debt  service  capacity  is  expected  to  improve  in  2025.  During 
2024,  the  share  of  NPLs  has  increased,  albeit  from  very  low  levels.  After  a  deterioration  in 
2023, profit indicators improved in 2024, whereas real investment growth remained negative.  

•  The household debt ratio decreased to 64% of GDP (and 83% of GHDI) in 2024, and remains 
high.  Net  credit  flows  continued  to  be  negative  in  2024,  implying  that  the  volume  of 
reimbursements  exceeded  the  volume  of  new  loans  given  out.  A  contributing  factor  was  that, 
due  to  the  high  proportion  of  flexible  rate  mortgages,  the  cost  of  borrowing  on  outstanding 
loans had risen from less than 1% in 2021 to 4% early 2024. By 2025-Q3, it has come down 
again to below 3%. Households’ net interest payments were around 1.5 pps. of GHDI higher in 
2024  than  in  2021.  Credit  growth  is  expected  to  recover  slowly  going  forward.  As  real 
disposable  income  recovered  in  2024  while  real  consumption  remained  flat,  the  saving  rate 
increased to 12%, around 1 pp. above its 2019 level. 

103 

3. Country sections 

•  House prices decreased by 3.1% in 2024 and shows signs of stabilisation in the first half of 
2025.  The  price-to-income  ratio  was  21  pps.  below  the  long-term  average,  suggesting  house 
prices are moderate relative to income. House prices are estimated to be undervalued by 15%. 
Building  permits  were  low  (302  m²  per  1000  persons),  indicating  a  limited  increase  in 
supply°(65).  

•  Government debt is significant and is increasing, while deficits are substantial. Debt increased 
to 82.5% of GDP in 2024, which is some 17 pps. above its pre-COVID-19 level, in part reflecting 
the recession and low growth in recent years. Moreover, debt  is forecast to increase further in 
2025 and 2026. The government deficit increased to 4.4% of GDP in 2024 and it is forecast to 
stay essentially unchanged this year before receding somewhat next year  (66). Recurrent debt-
increasing stock-flow adjustments also contribute to the rising debt, much on the accumulation 
of financial assets by the public pension funds. Gross financing needs have been increasing and 
are high and interest expenditure has been clearly rising. Nonetheless, spreads on Finnish long-
term sovereign bonds compared with the best rate euro area sovereign debt remain limited and 
have  receded  very  slightly.  Government  guarantees  have  been  among  the  largest  in  the  EU. 
Fiscal sustainability risks remain high in the medium term (67).  

•  The  financial  sector  faces  limited  risks.  The  capitalisation  and  profitability  of  the  banking 
sector  have  remained  broadly  unchanged  and  close  to  the  respective  EU  medians.  The  non-
performing  loans  ratio  continued  to  increase,  from  1.1%  in  2023  to  1.4%  in  2024,  while 
remaining  below  the  EU  median.  At  the  same  time,  the  high  share  of  mortgage  debt  with 
variable  interest  rates  represents  a  risk  and  the  housing  market  has  experienced  a  price 
correction despite house prices showing signs of undervaluation.  

Graph 3.26: Selected graphs, Finland 

Source: Eurostat and European Commission forecasts and calculations. 

(65)  EU last decade average stands at around 450 m² per 1000 persons. 

(66)  In June 2025, the Commission decided not to initiate an excessive deficit procedure for Finland in view of the excess over 
3% of GDP in 2025 and 2026 being due to additional defence  expenditure in accordance with Article 2(5) of Regulation 
(EU) No 1467/97, which establishes that if the national escape clause is activated, the Commission and the Council may 
decide not to reach a conclusion regarding the existence of an excessive deficit. Finland has requested the activation of the 
national escape clause on 30 April 2025, and the Commission recommended to the Council in line with such a request and 
the Council recommended accordingly in July 2025. See Report prepared in accordance with Article 126(3) of the Treaty on 
the Functioning of the European Union, COM(2025) 615 final. 

(67)  European Commission (2025), Debt Sustainability Monitor 2024, European Economy Institutional Paper 306.  

104 

-6-5-4-3-2-10010203040506070809010016171819202122232425f26f% of GDP% of GDPb) Government debt and balanceGov. debtGov.balance (rhs)-50510141516171819202122232425f26fPpsa) Decomposition of rate of change of ULC Inflation (HICP)Real Compensation/hr.Productivity/hr. (neg. contrib.)ULCULC in EU27     
 
 
Table 3.26:  Key economic and financial indicators, Finland 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

105 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)1.90.3-0.90.40.10.9Real GDP per capita (1 year % change)1.80.1-1.3-0.4-0.30.7GDP deflator (1 year % change)1.43.43.50.70.91.7Harmonised index of consumer prices (1 year % change)1.03.24.31.01.91.6Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)0.51.84.12.22.41.4External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%-1.1-0.3-1.0-1.3-0.8-1.0Current account balance, balance of payments (% of GDP)-0.8 (1)-0.6 (2)-0.8-0.6-0.9-0.7-0.9-1.5of which: trade balance (% GDP)0.1-0.60.00.4of which: income balance (% GDP)-0.90.0-0.9-1.0Net international investment position (% of GDP)-35%-77.9 (3)2.4 (4)-1.5-0.412.924.720.920.0NENDI - NIIP excluding non-defaultable instruments (% of GDP)3.610.66.53.6Net lending-borrowing (% of GDP)-0.7-0.5-0.9-0.6CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)-1.47.114.610.77.44.6Nominal unit labour cost index per hour worked (1 year % change)0.43.25.00.22.02.3Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)0.3-0.5-1.8-1.9-3.6-3.0Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)0.1-1.03.0-0.9-0.9-0.4Export performance against advanced economies (3y % change)-3%5.20.5-6.2-7.5-2.62.0Export performance against advanced economies (1 year % change)3.1-1.0-3.3-3.32.71.1Core inflation differential vis-à-vis the euro area (pps.)-0.5-0.3-0.9-0.70.0-0.7CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%64.1 (5)89.2 (6)81.382.377.978.377.876.8NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%4.34.04.10.90.41.6Households and housing marketHousehold debt, consolidated (% of GDP)+55%49.5 (5)62.6 (6)65.568.464.763.963.362.1Household debt, consolidated (% of GHDI)89.492.184.882.6Household credit flow, consolidated (% debt stock t-1)+14%4.14.0-0.4-0.30.10.6House price index, nominal (1 year % change)+9%0.82.5-6.2-3.1-1.00.0House prices over/undervaluation gap (7)-1.3-1.2-10.0-14.9Standardized price-to-income ratio98.695.882.578.5Building permits (m2 per 1000 inh)677.0655.5358.6302.4GovernmentGeneral government gross debt (% of GDP)60%65.874.177.182.588.190.9General government balance (% of GDP)-0.8-2.8-2.9-4.4-4.5-4.0Banking sectorReturn on equity of banks (%)7.38.213.513.2Tier-1 capital ratio banking sector (% risk-weighted assets)19.819.119.719.9Gross non-performing loans, domestic and foreign entities (% gross loans)1.41.21.11.41.3Cost of borrowing for households for house purchase (%)0.91.13.93.92.9Cost of borrowing for NFCs (%)1.51.74.95.03.8Labour marketUnemployment rate (% labour force Y15-74)+10%7.6 (8)7.77.47.28.49.59.3Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp1.91.92.60.6-0.5-0.5           forecast 
      
 
3. Country sections 

SWEDEN 

House prices, household debt, and corporate debt levels remain elevated. Credit flows to corporates 
contracted in 2024 and lending to households remained muted but corporate and household debt 
ratios  remain  elevated.  The  interest  coverage  ratio  of  corporates  is  among  the  lowest  in  the  EU. 
House prices stagnated in 2024 but show early signs of a rebound while remaining overvalued.  

After contracting in 2023, real  GDP grew by 0.8% in 2024 and is forecast to expand by 1.5% in 
2025  and  2.6%  in  2026.  Headline  and  core  inflation  decreased  in  2024,  with  headline  inflation 
reaching  2.0%  and  core  inflation  3.2%.  Headline  inflation  rebounded  slightly  and  is  forecast  to 
stand at 2.5% in 2025 while core inflation continued to ease and is forecast to stand at 2.4%, in 
line with the euro area average. The unemployment rate stood at 8.4% in 2024 and is expected to 
increase slightly to 9.0% in 2025.  

The  scoreboard  reading  for  Sweden  shows  that  four  indicators  were  beyond  their  indicative 
thresholds  in  2024,  namely  export  performance,  nominal  unit  labour  costs,  household  debt,  and 
non-financial corporations debt. Relevant developments worth highlighting: 

•  External  sustainability  indicators  continued  to  increase,  with  a  current  account  surplus 
reaching 5.9% of GDP in 2024, close to the level recorded in 2023. The current account surplus 
is  forecast  to  fall  slightly  but  remain  high  in  2025  and  2026.  The  NIIP  increased  strongly, 
reaching 67.4% of GDP in 2024, mainly on the back of valuation effects and the current account 
surplus.  

•  Competitiveness  developments  remain  relatively  stable,  despite  weak  export  performance. 
Both headline and core inflation rates were moderate in 2024 and are set to remain so in 2025 
as well. Last year, the REER appreciated only slightly, but the first half of 2025 was marked by 
strong gains, particularly due to the strengthening krona. ULC growth was 4% in 2024, driven by 
robust  wage increases  and  despite  productivity  gains,  and  cumulated  to  almost  16%  over  the 
last  3  years.  In  2025,  ULC  are  set  to  moderate  further.  The  2024  3-year  change  in  export 
market share stood at -4.8%.  

•  Non-financial  corporate  debt  has  remained  high  and  debt  service  capacity  deteriorated 
further.  The  NFC  debt-to-GDP  ratio  decreased  marginally  to  116.9%  and  is  expected  to  keep 
declining gradually over the next two years. Credit growth decreased further to -1.6% in 2024, 
but bank loan flows to NFCs have started to increase in recent quarters, suggesting a rebound in 
credit  growth  in  2025.  The  interest  coverage  ratio,  which  is  among  the  lowest  in  the  EU,  fell 
further  in  2024  but  showed  first  signs  of  recovery  after  mid-2024.  Debt  service  capacity 
deteriorated  also  due  to  savings  reaching  a  historical  low  and  revenue  generation  remaining 
weak. Despite an increase in the share of NPLs in 2024, the share remains the lowest in the EU.  

•  The  household  debt  ratio  decreased  by  2  pps.  to 84%  of  GDP  (121%  of GHDI)  in  2024,  but 
remains  high.  Net  credit  flows  remained  subdued  in  2024.  With  inflation  coming  down  and 
credit growth expected to increase in 2025, the deleveraging process is expected to slow down 
going forward. Due to the high proportion of variable rate mortgages, the cost of borrowing on 
outstanding  loans  climbed  up  from  around  1.5%  in  2021  to  more  than  4%  by  mid-2024.  By 
2025-Q3, it has come down again to below 3%. As a result, households’ net interest payments 
were more than 1 pps. of GHDI higher in 2024 than in 2021. The household saving rate is high, 
at  18%  in  2024,  and  above  its  2019  level.  Savings  mostly  reflect  financial  saving,  as 
investment in fixed capital is relatively weak, around 5% of GHDI. 

106 

3. Country sections 

•  House prices  were  relatively  stable  in  2024,  but  began  to  grow modestly in  the  first  half  of 
2025.  The  price-to-income  ratio  was  9  pps.  above  the  long-term  average  suggesting  house 
prices  are  slightly  elevated  relative  to  income.  Overvaluation  stood  at  20%  in  2024.  Building 
permits were low (320 m² per 1000 persons), indicating potential supply constraints in the near 
future (68). The recent evolution in house prices has been supported by the decrease in interest 
rates  combined  with  rising  incomes  that  led  to  an  8.9%  increase  in  the  borrowing  capacity  in 
2024. 

•  Government debt is low even if increasing somewhat recently. Debt increased to 34% of GDP 
in 2024 and is forecast to edge up slightly in 2025 and 2026. A budget deficit of 1.6% of GDP 
was recorded in 2024 and only marginally higher readings are expected for this year and next. 
Since mid-2024, yields on Swedish long-term government bonds have been among the lowest 
in the EU and slightly below the best rated sovereign debt of the euro area. 

•  The financial sector is stable, but characterized by high exposure to real estate, both directly 
and  indirectly,  while  household  indebtedness  remains  elevated.  The  banks’  Tier  1  capital  ratio 
has remained high and above the EU median while profitability has decreased somewhat while 
remaining close to the EU median. The non-performing loans ratio mildly increased in 2024 but 
is  among  the  lowest  in  the  EU  (1.1%).  Credit  provision  to  households  rebounded  in  2024  but 
credit to corporates contracted. Exposure to CRE remains a source of risk.  

Graph 3.27: Selected graphs, Sweden 

Source: Eurostat, ECB and European Commission calculations 

(68)  EU’s last decade average stands at around 450 m² per 1000 persons. 

107 

123456-10-5051015201516171819202122232425%%a) Housing marketHouse price (y-o-y growth rate, lhs)Loans for house purchase (y-o-y growth rate, lhs)Interest rate (rhs)0501001502002503001112131415161718192021222324% of GDPb) Decomposition of debt by sectorGovernmentHouseholds (+NPISH)Non-financial corporationsPrivate sector   
 
 
Table 3.27:  Key economic and financial indicators, Sweden 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

108 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)2.11.5-0.20.81.52.6Real GDP per capita (1 year % change)0.80.7-0.90.51.22.4GDP deflator (1 year % change)2.43.55.83.01.61.4Harmonised index of consumer prices (1 year % change)1.93.85.92.02.50.6Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.22.76.63.22.41.8External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%2.55.15.35.25.75.6Current account balance, balance of payments (% of GDP)0.5 (1)-1.0 (2)3.25.35.85.95.55.3of which: trade balance (% GDP)2.83.43.13.3of which: income balance (% GDP)0.41.92.72.6Net international investment position (% of GDP)-35%-86.5 (3)11.7 (4)7.121.039.067.453.555.8NENDI - NIIP excluding non-defaultable instruments (% of GDP)-11.7-6.9-6.42.0Net lending-borrowing (% of GDP)3.25.35.86.0CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)7.16.811.815.613.78.0Nominal unit labour cost index per hour worked (1 year % change)2.52.66.73.92.61.3Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)-5.9-1.3-7.5-9.7-4.62.6Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)-2.8-0.4-3.40.53.3-0.5Export performance against advanced economies (3y % change)-3%-3.34.0-3.8-4.84.63.1Export performance against advanced economies (1 year % change)-0.6-0.41.50.30.3-0.2Core inflation differential vis-à-vis the euro area (pps.)0.20.61.60.40.0-0.3CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%64.6 (5)66.0 (6)111.3121.3117.9116.9115.0112.9NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%6.97.00.0-1.61.92.8Households and housing marketHousehold debt, consolidated (% of GDP)+55%52.7 (5)73.1 (6)88.792.385.583.683.182.8Household debt, consolidated (% of GHDI)127.0133.0123.2120.8Household credit flow, consolidated (% debt stock t-1)+14%5.75.50.61.62.63.7House price index, nominal (1 year % change)+9%2.75.9-5.30.11.06.0House prices over/undervaluation gap (7)28.334.524.419.7Standardized price-to-income ratio120.0124.9112.0108.5Building permits (m2 per 1000 inh)711.9754.3330.2319.8GovernmentGeneral government gross debt (% of GDP)60%39.437.232.034.034.535.3General government balance (% of GDP)0.8-0.8-0.9-1.6-1.7-2.4Banking sectorReturn on equity of banks (%)11.39.413.112.6Tier-1 capital ratio banking sector (% risk-weighted assets)20.420.420.420.7Gross non-performing loans, domestic and foreign entities (% gross loans)1.10.91.01.11.1Cost of borrowing for households for house purchase (%)1.51.84.44.23.0Cost of borrowing for NFCs (%)1.11.85.14.83.6Labour marketUnemployment rate (% labour force Y15-74)+10%7.0 (8)6.78.37.78.49.08.4Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp0.90.21.91.2           forecast 
      
 
3. Country sections 

EURO AREA 

The euro area current account increased further in 2024, partly due to subdued domestic demand, 
but is set to decrease in 2025. Inflation has decreased and stabilised, mitigating the euro’s nominal 
appreciation, with the real effective exchange rate increasing only marginally in 2024. Unit labour 
costs  are  gradually  easing  following  increases  due  to  the  catching-up  of  nominal  wages  amid 
stagnant  productivity.  Private  debt  ratios  have  decreased  further  amid  still  muted  credit  and 
favourable nominal GDP growth.  

Real  GDP increased by 0.9% in 2024 and is forecast  grow at a slightly higher pace in 2025 and 
2026, with GDP growth forecast at 1.2% each year. Headline and core inflation decreased in 2024, 
to  2.4%  and  2.8%  respectively,  and  have  decreased  further  in  2025,  with  headline  inflation 
forecast  to  stand  at  2.1%  and  core  inflation  at  2.4%.  The  unemployment  rate  stood  at  6.4%  in 
2024 and is expected to remain stable in 2025.  

The scoreboard reading for the euro area shows that three indicators were beyond their indicative 
thresholds  in  2024,  namely  the  export  performance  against  advanced  economies,  nominal  unit 
labour costs, and general government debt. Relevant developments worth highlighting: 

•  External  sector  developments  remained  contained.  In  2024,  the  current  account  surplus 
further increased to 2.7% from 1.7% of GDP in 2023, reaching pre-pandemic levels well above 
benchmarks. Subdued domestic demand and the normalisation in terms-of-trade were the key 
factors in this increase in 2024. Despite disposable income growth exceeding inflation, private 
consumption remained sluggish in real terms, while corporate investments remained muted, and 
the net position of governments remained stable. The current account surplus is forecast to fall 
slightly in 2025. The NIIP increased strongly from 3.9% in 2023 to 12.2% of GDP in 2024, on 
the back of the current account surplus and valuation effects.  

•  Competitiveness  concerns  remain,  stemming  from  exchange  rate  dynamics,  subdued 
productivity,  and  export  underperformance.  In  2024,  average  headline  and  core  inflation  rates 
moderated  gradually  after  the  strong  inflationary  shock,  standing  at  2.4%  and  2.8%, 
respectively.  In  2025,  headline  inflation  is  set  to  come  back  close  to  the  2%  target,  and  core 
inflation is  expected  to  follow  with  a  slight positive gap.  Last  year,  the  REER  appreciated  only 
marginally, as the NEER gains of the euro were almost offset by a negative inflation differential 
against  main  trading  partners.  Despite  maintaining  a  negative  inflation  differential,  the  REER 
appreciated in the first half of 2025, as the euro rallied, particularly after the policy measures 
announced  in  the  US  since  April.  The  2024  3-year change  in  ULCs  cumulated  to  almost  15%, 
surging by  close to 5% within the year, as productivity stayed flat on account of the subdued 
economic  activity,  and  nominal  wage  increases  were  robust  to  catch  up  with  the  high  past 
inflation. Export performance against advanced economies was weak, marked by a 3-year drop 
of more than 3%. 

•  Non-financial corporate debt declined further in 2024, to 72.9% of GDP in the euro area and 
is expected to broadly stay at this level over the next years. Despite a modest recovery in real 
growth in 2024, lower inflation rates together with a slight pickup in borrowing, slowed the pace 
of deleveraging. Credit growth remained muted at around 1.0% in the euro area and bank loan 
flows to NFCs have started to pick up again in the first half of 2025 in line with the European 
Commission  Autumn  Forecast  which  expects  a  recovery  in  demand,  lower  interest  rates  and 
increased investment. Although elevated borrowing costs and high interest burdens have further 
weakened  debt  service  capacity,  recent  data  and  easing  financial  conditions  suggest  an 
impending  recovery.  While  profit  indicators  such  as  profit  shares,  unit  profit  growth  or  profit 
margins  deteriorated  further  early  in  2024,  they  have  since  stabilised,  and  activity  measures 

109 

3. Country sections 

have  started  to  modestly  improve.  However,  an  increase  in  NPLs  and  bankruptcies  points  to 
weaknesses  in  the  sector  and  persistent  elevated  trade  policy  uncertainty  and  geopolitical 
tensions pose a downside risk to the borrowing and investment activity of NFCs.  

•  The  household  debt  ratio  decreased  to  51%  of  GDP  (68%  of  GHDI)  in  2024,  10  pps.  lower 
than  4  years  ago.  Net  credit  flows  are  recovering  gradually,  slowing  down  the  deleveraging 
process.  At  15%,  the  gross  saving  rate  remains  around  2  pps.  above  its  pre-pandemic  level, 
mostly on account of increased financial saving, underpinned by strong real disposable income 
growth in recent years. 

•  The euro area housing market shows early signs of a moderate recovery. House prices rose by 
2% in 2024 after a 1.2% drop  in 2023. Mortgage rates fell gradually during 2024 from their 
late-2023 peak but have stabilized since early 2025 at levels still well above those seen before 
2022.  Credit  and  housing  transactions  are  recovering  but  remain  below  pre-2022  levels.  The 
price-to-income  ratio  improved  again  in  2024—though  less  than  in  2023—and  now  stands 
about 2% below its long-term average. 

•  Government  debt  stopped  declining  in  2024  and  risks  going  up  for  the  euro  area.  In  2024, 
government debt was essentially unchanged at 87.1% of GDP in the euro area. Those readings 
are  below  the  peaks  recorded  in  2020  at  the  worst  of  the  pandemic  crisis,  but  are  still  more 
than 3 pps. above pre-COVID-19 levels. Moreover, debt is forecast to edge up in 2025 and again 
in 2026 by about 1 pp. of GDP in each year°(69). That is the result of the continuation of high 
deficits  and  sometimes  significant  debt-increasing  stock-flow  adjustments,  and  with  lower 
inflation yielding less relief to the debt ratios. In 2024, the average government deficits fell to 
3.1%  of  GDP  in  the  euro  area.  Deficits  are  forecast  to  increase  slightly  in  2025  and,  on 
unchanged policies, again in 2026. Interest rates on long-term government bonds for euro area 
members  have  increased  somewhat  in  2025,  including  for  the  best  rated  issuers.  However, 
spreads  across  the  euro  area  have  narrowed  though  as  yields  for  the  least  well  rated  debt 
increased  less  or  even  fell  marginally. Yields  on  short-  and medium-term  debt  often  declined, 
leading to rising term premia.  

•  The  euro  area  financial sector  remains  sound.  The  Tier  1  capital  ratio  of the  banking  sector 
increased  slightly  further  in  2024.  Bank  profitability  also  increased  mildly,  with  the  growth  in 
non-interest income compensating tighter interest margins in the context of lower interest rates 
and subdued lending activity. The non-performing loans ratio remained unchanged, at 1.9%, but 
the  Stage  2  loan  ratio  increased.  Lending  to  firms  and  households  rebounded  from  the  2023 
trough  while  remaining  below  historical  averages  but  the pick-up  in  bank lending  continued in 
2025.  

(69)  Based  on  data  for  euro  area  aggregates  for  government  debt  on  a  non-consolidated  basis  (i.e.  not  corrected  for 

intergovernmental loans, including those made through the European Financial Stability Facility). 

110 

 
Table 3.28:  Key economic and financial indicators, Euro Area 

3. Country sections 

Notes: See Annex 1. 
Source: Eurostat and ECB; European Commission for forecast figures (Autumn forecast 2025). 

111 

averageaverageThresholdsBench. IBench. II2017-20192020-20222023202420252026Output and PricesReal GDP (1 year % change)2.01.20.40.91.21.2Real GDP per capita (1 year % change)1.81.0-0.20.50.91.0GDP deflator (1 year % change)1.43.06.13.02.52.3Harmonised index of consumer prices (1 year % change)1.53.75.42.42.11.9Core inflation (HICP excluding energy, food, alcohol and tobacco) (1 year % change)1.02.15.02.82.42.1External positionCurrent account balance, balance of payments (% GDP, 3y average)-4%/6%3.12.11.41.42.12.2Current account balance, balance of payments (% of GDP)2.91.41.72.72.01.9of which: trade balance (% GDP)of which: income balance (% GDP)Net international investment position (% of GDP)-35%-10.8-0.83.912.215.615.6NENDI - NIIP excluding non-defaultable instruments (% of GDP)-29.2-29.7-24.4-23.7Net lending-borrowing (% of GDP)2.72.02.02.8CompetitivenessNominal unit labour cost index per hour worked (3y % change)9% (EA) 12% (Non-EA)3.16.79.714.614.310.1Nominal unit labour cost index per hour worked (1 year % change)1.52.36.24.53.12.3Real effective exchange rate - 42 trad. part., HICP defl. (3y % change)±3% (EA) ±10% (Non-EA)2.70.91.51.7-5.8-3.5Real effective exchange rate - 42 trading partners, HICP deflator (1 year % change)1.1-0.34.80.5-1.9-0.8Export performance against advanced economies (3y % change)-3%1.90.3-3.8-3.3Export performance against advanced economies (1 year % change)0.3-1.02.0-0.5Core inflation differential vis-à-vis the euro area (pps.)0.00.00.00.00.00.0CorporationsNon-financial corporate (NFCs) debt, consolidated (% of GDP)+85%81.084.675.372.971.871.7NFC (excl. FDI) credit flow, cons. (% debt stock t-1, excl. FDI) +13%2.35.11.71.02.94.5Households and housing marketHousehold debt, consolidated (% of GDP)+55%57.158.552.651.150.550.2Household debt, consolidated (% of GHDI)77.377.270.768.1Household credit flow, consolidated (% debt stock t-1)+14%3.23.70.51.22.43.1House price index, nominal (1 year % change)+9%4.56.8-1.22.04.73.8House prices over/undervaluation gap (7)Standardized price-to-income ratio98.4106.199.997.5Building permits (m2 per 1000 inh)438.2440.7349.3328.0GovernmentGeneral government gross debt (% of GDP)60%85.593.287.087.1General government balance (% of GDP)-0.6-5.2-3.5-3.1-3.2-3.3Banking sectorReturn on equity of banks (%)5.55.08.58.8Tier-1 capital ratio banking sector (% risk-weighted assets)15.916.917.417.8Gross non-performing loans, domestic and foreign entities (% gross loans)3.82.11.91.9Cost of borrowing for households for house purchase (%)1.81.63.73.73.3Cost of borrowing for NFCs (%)1.71.74.74.93.8Labour marketUnemployment rate (% labour force Y15-74)+10%6.7 (8)8.37.56.66.46.46.3Labour force participation rate - % pop. aged 15-64 (3y change in pp)-0.2 pp0.90.22.51.7           forecast 
          
 
 
 
 
ANNEX 1: NOTES TO THE TABLES OF THE COUNTRY SECTIONS 

Table A1.1:  Notes to the tables of the Country sections 

Source: European Commission 

112 

(4)Fundamentals-explainedNIIPbenchmark(NIIPnorm):theNIIPachievedifthecountryhadrunacurrentaccountbalanceinlinewithfundamentalssince1994.ItthusrepresentsthepartoftheNIIPthatcanbeexplainedbyfundamentals.TurriniandZeugner(2019),“BenchmarksforNetInternational Investment Positions”, European Economy, Discussion Paper 97, DG ECFIN, European Commission.(8) Non-accelerating wage rate of unemploymentFigures highlighted are the ones at or beyond the threshold.(1)Currentaccountsinlinewithfundamentals(currentaccountnorms):derivedfromreducedformregressionscapturingthemaindeterminantsofthesaving-investmentbalance,includingfundamentaldeterminants,policyfactorsandglobalfinancialconditions.SeeCoutinho,Turrini,andZeugner(2018), “Methodologies for the Assessment of Current Account Benchmarks”, European Economy, Discussion Paper 86, DG ECFIN, European Commission. (2)CurrentaccountrequiredforaspecificNIIPtarget:calculationsmakeuseofCommission’sT+10projections.SeeCoutinho,Turrini,andZeugner(2018), “Methodologies for the Assessment of Current Account Benchmarks”, European Economy, Discussion Paper 86, DG ECFIN, European Commission. (3)PrudentialNIIP/NENDIbenchmark:theprudentialbenchmarkisthecountry-specificNIIPbeyondwhichestimatessuggestthatabalanceofpaymentscrisisismorelikely.TurriniandZeugner(2019),“BenchmarksforNetInternationalInvestmentPositions”,EuropeanEconomy,DiscussionPaper 97, DG ECFIN, European Commission. (5)Prudentialthresholdfornon-financialcorporateandhouseholddebt-to-GDPratio:correspondstothelevelabovewhichbankingcrisesbecomemorelikely.Itisderivedfromregressionsminimisingtheprobabilityofmissedcrisesandthatoffalsealerts.Bricongneetal.(2019),“IsPrivateDebtExcessive?”, Open Economies Review, 1-42.(6)Fundamentals-basedbenchmarksfornon-financialcorporateandhouseholddebt-to-GDPratios:assessesprivatedebtfromregressionscapturingthemaindeterminantsofcreditgrowthandtakingintoaccountagiveninitialstockofdebt.Bricongneetal.(2019),“IsPrivateDebtExcessive?”,OpenEconomies Review, 1-42.(7)Housepricesover/undervaluationgap:isthesimpleaverageoftheprice-to-income,price-to-rentandmodelvaluationgaps.Themodelvaluationgapisestimatedinacointegrationframeworkusingasystemoffivefundamentalvariables:totalpopulation,realhousingstock,realdisposableincomepercapita,reallong-terminterestrateandpricedeflatoroffinalconsumptionexpenditure.BasedonPhiliponnetandTurrini(2017),“AssessingHouse Price Developments in the EU”, European Economy, Discussion Papers 48, DG ECFIN, European Commission. 
 
 
      
 
ANNEX 2: MIP SCOREBOARD 

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Annex 2. MIP scoreboard 

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