Greece’s economy is expected to grow faster than the eurozone average through 2028, but rising inflation driven by energy costs and services threatens household purchasing power, according to a new Bank of Greece analysis published on Saturday.
The central bank’s Note on the Greek Economy highlights continued growth prospects despite international uncertainty and higher energy prices, while warning that renewed inflation poses a key risk to the country’s economic outlook.
According to the Eurosystem’s September projections, Greece’s gross domestic product (GDP) will grow by 2% in 2026, 1.9% in 2027 and 2% in 2028.
Greece’s economy grew by 1.9% year-on-year in the second quarter of 2026, compared with 1.2% across the eurozone, maintaining its stronger growth performance.
Consumption and Investment Drive Growth
Private consumption, investment and exports of goods and services are expected to remain the main drivers of economic growth.
Second-quarter figures support this outlook, with household consumption rising by 1.7% year-on-year, investment increasing by 6.1% and exports growing by 2.2%.
However, imports grew faster than exports, limiting the contribution of foreign trade to economic expansion. The figures highlight the importance of strengthening domestic production and broadening Greece’s export base.
Investment also accounts for a larger share of economic output than previously estimated. The revised investment-to-GDP ratio for 2025 stands at 18%, up from the previous estimate of 16.9%, suggesting that investment plays a growing role in expanding the country’s productive capacity.
Short-term indicators also point to continued economic activity. Greece’s manufacturing Purchasing Managers’ Index (PMI) remained at 54 points in September, signalling expansion, while industrial production increased by 5.8% in August compared with the same month a year earlier.
Employment also strengthened, while the unemployment rate fell to 7.4% in August.
Public investment and funding from the Recovery and Resilience Facility are expected to support demand, while fiscal measures introduced for 2026 aim to increase disposable household income.
Inflation Emerges as the Main Economic Risk
Inflation represents the most immediate threat to Greece’s positive economic outlook.
The Harmonised Index of Consumer Prices rose to 5.1% in September, up from 3.7% in August. Average inflation reached 3.8% over the first nine months of 2026.
The acceleration reflects a sharp increase in energy costs and persistent price pressures in the services sector. These pressures extend beyond fluctuations in fuel prices, keeping the cost of living a central concern for households.
The Eurosystem forecasts inflation of 3.5% for Greece in 2026, with energy prices and services continuing to push prices higher.
Inflation is then expected to ease to 2.7% in 2027 and 2.2% in 2028, provided international energy commodity prices moderate.
However, renewed geopolitical tensions or a prolonged increase in energy costs could undermine these projections and prolong pressure on household budgets.
Greece Faces Challenge of Sustaining Growth
Greece’s central economic challenge is to turn strong investment and resilient domestic demand into lasting productivity gains without allowing inflation to erode household incomes and weaken consumption.
Although the economy continues to outperform the eurozone average, the outlook will depend on its ability to strengthen domestic production, expand exports and sustain investment while containing the cost-of-living pressures facing households.
(Source: AMNA)
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