Greece is set to enter 2026 with economic growth largely taken for granted. Yet behind the headline optimism, the state budget for the year highlights a series of challenges that could test the resilience of the recovery. From ambitious investment targets to stubborn inflation and lagging household incomes, the outlook combines promise with significant uncertainty.

Investment: The Big Bet of 2026

The centerpiece of Greece’s economic strategy for 2026 is investment. According to the budget, investment growth is expected to accelerate sharply, reaching 10.2% in 2026, up from 5.7% in 2025 and 4.5% in 2024. This surge is projected to be driven by a combination of private-sector activity and a significantly expanded public investment program, budgeted at €16.7 billion in 2026, compared with €14.6 billion the year before.

If achieved, this pace would far exceed the eurozone average, where investment growth is estimated at 2.5% in 2026. The investment-to-GDP ratio is also forecast to rise, from 16.4% in 2025 to 17.7% in 2026, narrowing Greece’s long-standing productive gap with the rest of Europe.

However, past performance casts doubt on these projections. Investment targets have repeatedly fallen short in recent years. In 2024, investment growth was initially forecast at 15.1% but ultimately reached just 4.5%. A similar pattern appeared in 2023, when projections of 15.5% translated into an outcome of only 6.6%. Even for 2025, the original target of 8.4% has since been revised down to 5.7%.

This history raises questions about whether the double-digit target for 2026 is realistic or another optimistic assumption that risks undermining broader growth plans.

Growth Outlook: Solid, but Not Guaranteed

The government forecasts GDP growth of 2.4% in 2026. Of this, 1.8 percentage points are expected to come from higher investment, while 0.6 points are attributed to tax cuts and fiscal measures totaling €1.76 billion.

Independent assessments are more cautious. The Hellenic Parliamentary Budget Office estimates growth will fall within a range of 1.9% to 2.6%, depending largely on whether investment plans materialize. Inflation adds another layer of uncertainty. According to the Budget Office projections inflation will hover between 2.2% and 2.5% in 2026, noting that stronger growth could push prices closer to the upper end of that range.

While inflation is no longer seen as the single biggest threat to the economy, concerns remain about its persistence and the difficulty of bringing it closer to the eurozone target.

Recovery Fund: Running Out of Time

Concerns are growing among economists about the sustainability of Greece’s GDP growth, particularly as Greece’s use of funds from the EU Recovery and Resilience Facility (RRF) is set to conclude in August 2026. Warning signs of a slowdown are already visible, according to the Foundation for Economic and Industrial Research (IOBE), one of Greece’s leading economic think tanks.

IOBE’s director general, Nikos Vettas, has sounded a clear warning that Greece risks slipping into a much weaker growth trajectory once the Recovery Fund expires. He cautioned that, without a new investment vehicle, GDP growth could gradually decline toward 1% over the next five years.

Another critical unresolved question is whether Greece will ultimately manage to absorb all the EU funds it is entitled to receive before the program closes.

Similar concerns have been voiced by the governor of the Bank of Greece, Yannis Stournaras, in the central bank’s interim report. According to the Bank of Greece, approximately €11.4 billion of the €36 billion allocated to Greece under the Recovery and Resilience Facility has not yet reached the real economy.

This shortfall raises serious doubts about whether Greece will be able to fully absorb the available funds by August 2026, when the Recovery Fund officially expires across Europe. While the government’s economic team continues to express confidence that the targets will be met, the Bank of Greece has made it clear that it does not share the same level of optimism.

The Cost-of-Living Squeeze

Inflation remains a persistent challenge for the Greek economy, with uncertainty over how quickly price pressures can ease. According to the 2026 state budget, Greece’s Harmonized Index of Consumer Prices is projected to increase by 2.2% next year. Despite government efforts the cumulative impact of inflation has been severe, with consumers continue to face high prices.

Food and housing costs remain the biggest drivers of the cost-of-living crisis, following nearly four and a half years of elevated inflation. Official data from Hellenic Statistical Authority (ELSTAT) show that prices have followed a steady upward path since May 2021, when inflationary pressures emerged after the deflationary period of the pandemic, through November 2025, the latest available data.

Between May 2021 and November 2025, prices for food and nonalcoholic beverages rose by 34.38%, according to ELSTAT figures. Clothing and footwear prices increased by 31.31% over the same period, contributing to a growing shift among consumers toward second-hand goods.

High inflation has significantly eroded purchasing power. A recent study by Eurobank shows that Greek incomes remain 14.8% below their 2010 levels, despite wage increases in recent years. As salary growth continues to lag behind price increases, household disposable income remains under sustained pressure heading into 2026.Inflation may be easing on paper, but high prices remain a daily reality for households.

Fifteen years after the debt crisis erupted, Greece and Italy are the only countries affected by that period that have not fully recovered 2009 income levels. By contrast, Spain, Cyprus and Portugal now report higher disposable incomes than before the crisis.

The gap is also evident in per capita GDP adjusted for purchasing power. Greece stands at 69% of the EU average, among the lowest in the bloc, trailing only Bulgaria (66%) and Latvia (68%)

A Year of High Stakes

For Greece, 2026 will be a year of high expectations and high stakes. Delivering on investment promises, fully absorbing EU recovery funds and easing pressure on household incomes will be crucial not just for short-term growth, but for the credibility of the country’s long-term economic strategy.

Ultimately, the central challenge is not just statistical growth but whether citizens actually feel better off. Unless rising incomes begin to outpace prices and the cost-of-living crisis eases, economic progress will remain abstract.