Greece’s central bank has revised downward its growth outlook for 2026, citing escalating geopolitical tensions and the ongoing conflict in the Middle East as key factors weighing on economic momentum.
Speaking at a general shareholders’ meeting, the governor of the Bank of Greece said the country’s growth rate is expected to slow to 1.9% in 2026, compared with earlier projections of stronger expansion. The downgrade reflects weaker consumption growth and a negative contribution from the external sector.
Slower eurozone growth adds pressure
The revised outlook also aligns with a broader slowdown across the euro area. Growth in the eurozone is now projected to fall to 0.9% in 2026, down from 1.4% in 2025, as geopolitical uncertainty and energy market disruptions increase the risk of stagflation-like conditions.
Investment and consumption still support growth
Despite the weaker forecast, officials expect the Greek economy to continue outperforming the eurozone average.
Investment is projected to remain the main driver of growth, supported by European recovery funds, improved credit conditions, and foreign direct investment. Private consumption is also expected to continue rising, driven by higher employment, wage growth, and increasing disposable income, though at a slower pace than in previous years.
Labor market conditions are expected to remain strong, with continued job creation and unemployment projected to decline to around 8.2%.
Inflation pressures expected to persist
Inflation is also expected to face renewed pressure in 2026. The central bank forecasts headline inflation rising to 3.1%, above the eurozone average, due to external cost pressures, particularly in energy markets.
At the same time, core inflation is expected to ease slightly to 3.0%, as price increases in services gradually moderate.
External imbalance remains key vulnerability
A key concern highlighted by policymakers is Greece’s persistent current account deficit, which is expected to remain largely unchanged in 2026.
Exports, tourism revenues, European funding inflows, and foreign investment are expected to provide support, but rising energy costs, higher imports of investment goods, and inflationary pressures continue to weigh on the trade balance.
Officials stressed that the outlook for the external sector depends heavily on the duration and intensity of geopolitical conflicts in the Middle East and their impact on global demand, tourism, and energy prices.
Fiscal stability provides buffer
On the fiscal side, authorities emphasized that Greece’s improved structural position provides room to absorb external shocks without endangering financial stability.
Strong primary surpluses, a rapid decline in public debt, and significant cash reserves are seen as key buffers against market volatility.
