Greece’s independent fiscal watchdog has cut its growth forecast for 2026 and sharply raised its inflation outlook, warning that the economy is losing momentum just as price pressures build again.
The Hellenic Fiscal Council, an independent body that monitors the government’s budget performance, now expects the economy to expand by 1.9% this year. That is down from an earlier projection of 2.3%. In its Spring Report 2026, the council also raised its inflation forecast to 3.2%, well above the 2.2% written into the state budget passed only months earlier.
The mix is an awkward one. It signals slower expansion and a heavier cost of living for households at the same time. Even with the state continuing to beat its budget targets, the council delivered a clear warning about the real economy.
Growth cools, but still outpaces the eurozone
The council sees gross domestic product rising 1.9% in 2026, easing from 2.1% in 2025. That confirms an economy moving into a slower phase. Greece is still growing faster than many of its eurozone peers, the report notes, but the deceleration is now visible.
Growth continues to lean on three familiar pillars: private consumption, investment funded through the EU Recovery Fund, and tourism. The Recovery Fund is the bloc’s post-pandemic grant and loan program, a major source of Greek public investment in recent years. External conditions, however, are turning less favorable.
The report lists the main forces that could slow the economy further: high energy prices, weaker demand abroad, a slowdown in exports, rising production costs, and pressure on tourism. Each, it says, could weigh on both consumer spending and business investment, sapping the economy’s drive.
An inflation shock the budget did not anticipate
The picture on prices is more troubling. The council revised its forecast for harmonized inflation, the standardized measure used across the eurozone, to 3.2% for 2026. The November 2025 state budget had assumed just 2.2%. That is a full percentage point higher, a sign of how much stronger price pressures have proved.
For 2027 the council expects inflation to ease to 2.4%. Even so, that would leave it above the European Central Bank’s 2% target. The upward trend is already showing in the data. Figures from ELSTAT, the national statistics agency, put inflation at 4.6% in April 2026.
For households, the effect is direct. Rising prices erode real purchasing power even as wages and incomes climb.
A growth model with old weaknesses
Strong investment numbers have not resolved the economy’s long-standing imbalances. The council finds the same chronic vulnerabilities in Greece’s growth model.
Private consumption still accounts for close to two thirds of GDP, at 67.8%. Net exports remain negative because the country relies heavily on imports. Investment rose 8.9% in 2025, but as a share of GDP it still sits below the European Union average.
Sustaining growth over the coming years is, in the council’s view, the central challenge. It points to entrenched structural problems: high unemployment, especially among the young, low productivity, and a large external debt. Those come alongside the approaching end of the Recovery and Resilience Facility, the EU program underwriting much of Greece’s recent investment, and heightened geopolitical uncertainty. Together, the council argues, they make finding new drivers of growth a necessity rather than a choice.
