Bank of Greece projects 1.9% GDP growth in 2026 as war, inflation and climate risks loom

The Bank of Greece’s latest "Note on the Greek Economy" outlines the principal risk framework for the next three years, highlighting the uncertainty from the war in the Middle East, persistent inflationary pressures, climate‑change impacts and possible delays in using Recovery Fund resources and implementing reforms. While maintaining a positive medium‑term outlook, the report revises the 2026 growth estimate down to 1.9%, staying at 1.9% in 2027 and edging to about 2% in 2028 – still above the euro‑area average. Growth is expected to be driven mainly by private consumption, supported by higher real disposable income, rising employment and wages, and a gradual easing of inflation after 2026. Investment is forecast to rise 5.8% in 2026, bolstered by Recovery Fund financing, strong credit expansion and increased foreign direct investment, projected to exceed 19% of real GDP by 2028. The external sector is seen as a drag, with higher energy prices, trade disruptions from the war and greater import dependence widening the trade deficit.