Athens, Greece – In a positive development reflecting the impact of regional stability on European markets, the Bank of Greece announced that the recent peace agreement between the United States and Iran has contributed to a “wave of optimism” regarding the trajectory of the Greek economy.
In its latest economic bulletin, the bank emphasized that the easing of tensions in the Middle East offers a genuine opportunity to achieve growth rates exceeding those previously projected under conditions of war and global uncertainty.
Promising growth indicators
According to the Bank of Greece’s “more moderate” scenario, Greek GDP is expected to grow by 2.0% in 2026, continuing its upward trend to 2.1% in both 2027 and 2028.
These figures represent a significant improvement compared to the previous baseline scenario, which projected growth of only 1.9% due to concerns about ongoing regional conflicts. As for inflation (the Harmonized Index of Consumer Prices), it is expected to reach 3.7% in 2026. Subsequently, it will gradually decline to 2.5% in 2027 and stabilize at 2.2% in 2028. This is expected to bolster monetary stability in the country.
expansionary fiscal policies
Bank experts anticipate that 2026 will be fiscally expansionary, thanks to government measures aimed at boosting citizens’ disposable income, with a particular focus on reducing the tax burden.
This trend is supported by strong fiscal performance, with the government’s primary balance for 2025 reaching 4.9% of GDP, one of the highest rates in the European Union. Greece also succeeded in reducing its public debt ratio by 8 percentage points, from 146.1% of GDP, thanks to high primary surpluses and early debt repayments.
Potential challenges and risks
Despite this cautious optimism, the Bank of Greece warned of risks that could affect these projections, emphasizing that the “downside” remains. These risks center on the possibility of the US-Iran agreement failing to be implemented. Such a failure could lead to a renewed conflict in the Middle East.
The list of threats also includes persistent inflationary pressures, growing global protectionist tendencies, and the unforeseen impacts of climate change, which could pose additional challenges to the national economy in the coming years. The bank emphasizes that utilizing the “fiscal space” generated by strong revenue performance in recent years remains the most important tool for enhancing Greece’s economic resilience to any sudden international shocks.
