A key question in the public debate is whether the Greek economy is undergoing a transformation in its growth model. The available evidence points to an affirmative answer. The improvement in Greece’s economic performance is no longer merely cyclical; it increasingly reflects structural change. Undoubtedly, significant scope for further improvement remains. Nevertheless, particularly since 2019, Greece has been transitioning towards a more outward-looking, investment-driven, and productive growth model. This conclusion is not based on qualitative conjecture; it is underpinned by quantitatively measurable indicators.
Stronger foundations and framework conditions
The country’s fiscal position, the condition of its financial system, and the level of private-sector indebtedness have all improved substantially compared to the pre-crisis period. At the same time, the degree of openness of the Greek economy has increased, while product, services, and labor markets have become more adaptable to changing economic conditions. OECD indicators measuring regulatory barriers and the degree of market competition record significant improvements. Of course, investment-related challenges certainly remain. Yet, the overall picture points to stronger macro and micro fundamentals supporting a stronger growth model. This progress is reflected in Greece’s significant improvement across all major international rankings of business environment.
The transformation is reflected in GDP composition
Greek GDP has shifted towards a more outward-oriented and investment-led composition. Compared with the pre-crisis period, exports have almost doubled as a share of GDP, increasing from approximately 20% to around 40%, while demonstrating remarkable resilience throughout the successive international crises of recent years. At the same time, since 2019, investment has increased by approximately six percentage points of GDP. Although private consumption remains comparatively high relative to the European average—indicating that the transition is not yet complete—the overall direction is clear: greater export orientation and capital deepening building a stronger productive capital base.
The main drivers of transformation
The change in Greece’s growth model is driven by three transformational factors:
First, the Greek economy is increasingly benefiting from economies of scale through firm expansion. Small enterprises continue to account for the overwhelming majority of the productive sector. However, an increasing number of these firms are growing in size, leading to a higher share of medium-sized and large enterprises in both employment and Gross Value Added (GVA). The ongoing scaling-up is critical to the transformation of the growth model, as larger production scale enhances firms’ capacity to invest, innovate, and adopt new technologies.
Second, the productive base is gradually shifting towards activities with higher value added. Manufacturing, and industry more broadly, are increasing their contribution to both output and employment, while the share of high-technology and medium-high-technology sectors in Greek GDP continues to expand. Consequently, exports of high-technology goods have tripled compared with the previous decade. At the same time, knowledge-intensive services have also gained a larger share of economic activity. Foreign Direct Investment (FDI) has likewise increased significantly since 2019. Contrary to a commonly expressed view in public debate, data from the Bank of Greece show that the majority of FDI is not directed towards real estate. Instead, investment is increasingly concentrated in high-value-added sectors, including manufacturing, energy, telecommunications, information technology, professional services and others.
Third, Greece has been steadily improving its innovation performance. Although it continues to lag behind the European average, the overall trend is positive, particularly with regard to digitalization, the adoption of Artificial Intelligence (AI), and investment in intangible capital, such as intellectual property.
Productivity is improving
Despite the widespread perception that productivity has remained stagnant, data from the European Commission’s AMECO database shows that since 2020 Total Factor Productivity (TFP) in Greece has increased significantly (by 6.2%), at a pace more than twice the European Union average. This improvement is closely associated with the substantial increase in investment volumes (83% over the period 2019–2025, compared with just 1.5% in the European Union), as well as with changes in the composition of economic activity.
Labor productivity undoubtedly remains an important challenge. Nevertheless, rising investment, the achievement of economies of scale, and the ongoing shift towards higher value-added activities are creating the conditions for further improvements in this crucial area.
The quantitative depiction of structural change
According to estimates by the International Monetary Fund (IMF), Greece’s medium-term growth rate has increased from 0.9% in 2019 to 1.5% in 2025. Comparable—and even stronger—improvements are reflected in the estimations of both the European Commission and the OECD regarding the country’s potential GDP growth rate. As has consistently been the case in recent years, these estimates are likely to be revised upwards as the positive effects of ongoing investment and structural reforms are progressively incorporated into the historical time series upon which these estimates primarily depend.
Is this increase economically significant? Undoubtedly, yes. IMF estimates imply that over a ten-year horizon, the Greek economy will be approximately 7% larger than it would have been had it remained on its estimated 2019 medium-term growth trajectory. This estimate is broadly consistent with the Bank of Greece’s projections regarding the long-term impact of the Recovery and Resilience Facility (RRF) and suggests that Greece’s National Recovery and Resilience Plan, Greece 2.0, is achieving its key objective: Beyond supporting the post-pandemic recovery, it is strengthening the country’s medium-term productive capacity to the extent anticipated over the phase of its design.
Equally important, according to the IMF estimations, Greece’s medium-term growth rate has exceeded that of the euro area since 2023. This implies that the country has entered a period of gradual real convergence with the rest of the European economy.
The next phase: continuity and acceleration
Overall, the available evidence suggests that Greece is no longer merely recovering from the economic crisis of the previous decade. Rather, it is undergoing a structural transformation of its growth model—a process that has accelerated considerably since 2019. The principal challenge for the coming years is therefore not initiating this transition but accelerating and deepening it.
Achieving this objective requires maintaining both macroeconomic and political stability, while continuing reforms that strengthen human capital, investment, innovation, and productivity. Within this framework, the next generation of reforms should focus primarily on improving the country’s institutional performance, with the ultimate objective of establishing an even more effective incentive framework for investment, employment, and entrepreneurship. The forthcoming constitutional revision could represent a landmark in Greece’s institutional modernization, provided that it is used to remove longstanding institutional constraints which impact upon the economy’s long-term growth potential.
Michael Arghyrou is the Chief Economic Advisor to the Prime Minister of the Hellenic Republic
