Economic activity in Greece is set to decelerate, from 2.1% in 2025 to 1.8% in 2026, as the energy price shock erodes households’ real income and dampens consumption growth. Investment growth, however, is expected to remain robust, supported by continued absorption of EU funds. In 2027, GDP growth is projected to decline slightly to 1.6% as the implementation of the RRF winds down. Inflation is expected to increase to 3.7% in 2026, fuelled by the sharp increase in energy prices. In 2027, inflation is projected to decline to 2.4%, but inflation excluding energy and food is set to remain elevated as the price shock passes through to non-energy components. Unemployment is projected to decline further, albeit at a slower pace, reaching 7.9% in 2027. Greece is expected to maintain a favourable fiscal position, with sustained surpluses over 2025–27, despite expansionary fiscal measures. Solid nominal GDP growth and budget surpluses are projected to continue driving the debt-to-GDP ratio steadily downward, moving close to 134% by end 2027.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 2.1 | 1.8 | 1.6 |
| Inflation (%, yoy) | 2.9 | 3.7 | 2.4 |
| Unemployment (%) | 8.9 | 8.3 | 7.9 |
| General government balance (% of GDP) | 1.7 | 0.8 | 0.6 |
| Gross public debt (% of GDP) | 146.1 | 140.7 | 134.4 |
| Current account balance (% of GDP) | -6.0 | -7.1 | -6.1 |
EU funds and expansionary fiscal stance mitigate energy crisis impact
In 2025, the Greek economy maintained its growth momentum. GDP grew by 2.1% for the third consecutive year, driven by investment, private consumption and net exports.
Investment activity is expected to remain robust in 2026, supported by a record high inflow of EU funds to Greece under the RRF. However, the energy price shock is set to reduce households’ real disposable income. The expansionary fiscal package announced in 2025, including personal income tax cuts and public wage increases, together with the recent energy measures are expected to alleviate this impact somewhat. Still, private consumption is forecast to decelerate. Import demand is expected to stay robust, due to the high import dependency of investments. Output growth is forecast to decline further in 2027 as investment decelerates given with the conclusion of the RRF. Overall, GDP growth is projected to moderate to 1.8% in 2026 and to 1.6% in 2027, while, still staying above the EU average. Risks remain skewed to the downside, as a prolonged energy crisis could dampen services exports, particularly tourism.
Labour market remains resilient
The labour market continued to expand in 2025, with the unemployment rate declining to 8.4% in the last quarter, the lowest rate recorded since 2008, though still above the EU average of 6%. The long-term unemployment rate remained broadly unchanged, at close to 5% — the highest in the EU — reflecting long-standing structural challenges such as skill gaps, and insufficient child- and elderly care solutions. Vacancy rates have continued to decline, though they still indicate a tight labour market, especially in tourism and construction. Employment growth is set to persist but at a more modest pace, constrained by structural barriers and weaker economic activity.
Energy price shock drives inflationary developments
Inflation remained elevated in 2025, averaging at 2.9%, reflecting strong demand, a tight labour market, and the impact of measures to combat tax evasion. The recent surge in energy prices is set to increase retail energy prices and thereby inflation in 2026, gradually passing through to non-energy goods and services prices. In 2027, an assumed correction in energy prices should support disinflation, but the lagged increase in the prices of energy intensive goods and services will keep inflation elevated. Furthermore, strong demand and wage pressures fuelled by labour shortages will continue to impact price developments. As a result, inflation is forecast to increase to 3.7% in 2026 and to reach 2.4% in 2027.
Sustained fiscal strength despite expansionary measures
In 2025, the general government balance recorded a surplus of 1.7% of GDP, exceeding the 1.1% of GDP projected in the Commission’s 2025 Autumn Forecast. The stronger outcome reflects lower-than-expected expenditure, particularly in current spending, as well as higher-than-anticipated revenue, notably from VAT, supported by continued improvements in tax compliance.
In 2026, the surplus is set to remain robust but moderate to 0.8% of GDP. This forecast incorporates expansionary measures estimated at 0.6% of GDP in 2026 and 0.8% of GDP permanently from 2027 onwards, including reductions in personal income tax, property tax and VAT, as well as increases in pensions and public sector wages. It also includes temporary energy support measures, estimated at 0.2% of GDP, adopted in response to the recent increase in fuel prices. These measures are broadly targeted and include fuel subsidies for households, support for transport and agriculture, a one-off benefit to families with children and compensation for ferry operators. In addition, recently announced changes to existing measures, such as an increase in the pensioners’ benefit and a revision of the income criteria for the rent subsidy are estimated to have a budgetary cost of around 0.1% of GDP. Furthermore, defence expenditure is projected to increase from 2.4% of GDP in 2025 to 2.6% of GDP in 2026. Revenue developments, supported by nominal growth, are expected to partly offset the budgetary impact of these measures.
In 2027, the general government balance is projected to remain in surplus at 0.6% of GDP. This reflects continued moderate expenditure growth. At the same time, several surplus-reducing measures are expected to weigh on the balance, including the full-year impact of the 2026 fiscal package (0.8% of GDP), a further reduction in social security contributions (0.1% of GDP), and additional increases in public sector wages.
The public debt-to-GDP ratio declined to 146.1% in 2025, almost 43 pps below its pre-COVID peak recorded in 2018. The ratio is forecast to continue declining, falling to 134.4% by 2027, supported by strong nominal GDP growth and persistent primary budget surpluses.