As tensions reignite in the Iran conflict, the Institute of Economic and Industrial Research (IOBE) projects inflation in Greece to reach 3.7% in 2026, with GDP growth expected at 1.8%. Rising global economic disruptions — particularly in energy markets and supply chains — are driving upward pressure on prices.
Inflation Outlook: Modest Relief Expected in 2027
According to IOBE’s latest quarterly report, if the recent U.S.-Iran ceasefire holds and energy prices remain subdued, inflation could gradually ease to around 2.7% in 2027. However, renewed hostilities cast doubt on near-term prospects for a durable de-escalation.
Growth and Domestic Demand
Greece’s GDP is forecast to expand by 1.8% in 2026 and accelerate slightly to 2.0% in 2027. Private consumption remains the main growth driver, projected to rise by 1.6% in 2026 and 1.9% in 2027 — supported by stronger employment, wage increases, tax relief measures, and energy support schemes. Public consumption is expected to grow by 2.0% in 2026 and 1.4% in 2027.
Investment Momentum Continues
Investments are set to remain robust, as the Recovery and Resilience Fund (RRF) enters its final implementation phase. Additional support comes from strong credit expansion, an enhanced Public Investment Programme, and rising foreign direct investment inflows. Gross fixed capital formation is projected to increase by 7.6% in 2026 and 8.5% in 2027, with private investment gradually taking over from public spending as RRF disbursements wind down.
Risks to Investment
Key risks include persistently higher inflation compared to the euro area average — undermining Greece’s competitiveness — potential slowdowns in reform implementation ahead of elections, and possible delays in absorbing and effectively deploying RRF funds.
External Balance Widens
The current account deficit is expected to widen further in 2026–2027, primarily driven by surging imports linked to high-import-intensity investment activity, compounded by spillovers from the war on global trade. Imports are forecast to rise by 3.0% in 2026 and 4.2% in 2027, outpacing export growth of 2.0% and 2.5%, respectively.
Labor Market Improves Gradually
Employment is expected to strengthen moderately in both years, buoyed by growth in consumption, investment, exports, and select industrial and service sectors. The unemployment rate is projected to fall to 8.7% in 2026 and 8.2% in 2027.
IOBE Board President Yiannis Retzos noted that developments in the Greek economy reflect broader international pressures — though domestic policy choices continue to play a decisive role in shaping resilience and growth trajectories.