The Bank of Greece is expressing greater optimism about the prospects of the Greek economy following the latest geopolitical developments in the Middle East — and in particular, the agreement reached between the United States and Iran. According to the central bank’s latest Economic Bulletin, the de-escalation of tensions in the region is reshaping the landscape for international markets, significantly reducing uncertainty and increasing the likelihood that the Greek economy will grow at a faster pace than initially forecast. The central bank’s economists believe the agreement could act as a catalyst for a more favorable economic environment, with positive effects on both growth and price stability — while still acknowledging the risks that persist in an unstable global setting.
Read also: e-EFKA and DYPA payments: The full schedule through June 26
Bank of Greece: A new scenario with higher growth
In the new, more optimistic scenario presented by the Bank of Greece, the Greek economy is projected to grow at a rate of 2.0% in 2026 and 2.1% in both 2027 and 2028. These figures represent an improvement over the baseline scenario presented earlier, when Middle East tensions and uncertainty surrounding energy markets were weighing on forecasts. Under that previous baseline, growth had been estimated at 1.9% for this year, with similar levels projected for the years ahead.
As noted in the Economic Bulletin, “the recent agreement between the US and Iran supports the likelihood of a milder scenario for the Greek economy.” This assessment is grounded primarily in the reduction of geopolitical uncertainty, which directly affects energy costs, investment levels, and overall economic activity.
Inflation and public finance forecasts
The Bank of Greece maintains its estimate for harmonized inflation at 3.7% for 2026, and forecasts a gradual decline to 2.5% in 2027 and 2.2% in 2028. At the same time, the central bank’s economists note that fiscal policy is expected to remain expansionary in 2026, largely due to measures already decided to boost household disposable income. Particular emphasis is placed on the reduction of the tax burden, which is seen as supporting consumption and strengthening economic activity. The data on public finances also paint an encouraging picture.
The General Government primary surplus for 2025 was confirmed at 4.9% of GDP — one of the highest figures in the European Union. Meanwhile, the public debt ratio fell by 8 percentage points, reaching 146.1% of GDP. This improvement is attributed to the high primary surplus, the early repayment of obligations, and the positive differential between borrowing costs and the economy’s growth rate.
Risks that remain a concern
Despite the improved outlook, the Bank of Greece does not overlook the risks that continue to threaten the economy. According to the central bank’s analysis, these risks remain predominantly to the downside and are linked to the potential failure to implement the US-Iran agreement, or to a possible resurgence of conflict in the Middle East. Such a development could trigger a new spike in energy prices, intensify inflationary pressures, and weigh negatively on growth prospects. In addition, economists flag rising international trade protectionism and the increasingly frequent occurrence of extreme weather events — which affect production, transportation, and investment — as key risk factors.
Despite these caveats, the overall picture presented by the Bank of Greece is markedly more positive than in previous months. The de-escalation of Middle East tensions is creating a more stable environment for the Greek economy and boosting expectations for stronger growth in the years ahead.
