The reduced geopolitical risk and the improvement in the prospects growth of the Greek economy are boosting the GDP through 2028.

The Greek economy is entering a period of revised macroeconomic forecasts, as the de-escalation of geopolitical tensions in Middle East is reshaping the external environment and reducing significant sources of uncertainty that had affected previous forecasts. According to the updated analytical framework of the Bank of Greece, the more favorable international environment may support domestic economic activity, strengthening GDP prospects in the medium term, in conjunction with the maintenance of fiscal stability and the improvement of financing conditions. At the same time, the easing of pressures in international energy markets and the stabilization of trade flows are creating a more favorable environment for investment, while risks continue to be linked primarily to potential resurgences of geopolitical tensions and disruptions in global trade.

“A glimmer of optimism” for greater growth in the Greek economy is emerging from the peace agreement between the U.S. – Iran, according to the Bank of Greece.

Room for higher growth rates

Peace in the Middle East creates scope for higher growth rates in the Greek economy than those projected in the Bank of Greece’s baseline macroeconomic scenario.

As noted in the Bank of Greece’s latest Economic Bulletin, “the recent agreement between the U.S. and Iran supports the possibility of a more moderate scenario for the Greek economy.”

According to this scenario, GDP growth is projected to reach 2.0% in 2026 and 2.1% in 2027 and 2028, while harmonized inflation (HICP) is projected to stand at 3.7% in 2026, 2.5% in 2027, and 2.2% in 2028. It should be noted that, according to the Bank of Greece’s baseline scenario, GDP was projected to grow by 1.9% this year and that the growth rate would remain at the same level for the next two years, due to the significant uncertainty caused by the war in the Middle East for the global economy. Inflation was projected to stand at 3.7% this year, before declining over the next two years.

Revenue outperformance

Bank of Greece economists estimate that the fiscal stance is expected to be expansionary in 2026 due to the fiscal policy measures adopted to boost disposable income, with an emphasis on reducing the tax burden.

The general government’s primary balance for 2025 (4.9% of GDP) was confirmed as one of the highest in the EU, and the debt-to-GDP ratio fell significantly (by 8.0 percentage points, to 146.1% of GDP), due to the high primary surplus, early debt repayment, and the significant spread between interest rates and the growth rate

Revenue outperformance in recent years has created fiscal space, allowing for the adoption of permanent expansionary measures.

The risks surrounding the growth forecasts are mainly on the downside and relate primarily to a possible failure to implement the U.S.-Iran agreement and a prolongation of the war in the Middle East, with more persistent inflationary pressures, a further rise in trade protectionism, and unpredictable weather events.