Alpha Bank: Greek economy holds firm, but external risks persist

However, the escalation of geopolitical tensions in the Middle East may create new challenges for economic activity, depending on the duration and intensity of the conflicts. This is highlighted by the economic analysts of Alpha Bank in the bank’s latest economic bulletin.

According to the analysis, the magnitude of the impact will depend on critical parameters, such as the duration of military operations, the extent of disruptions to energy flows, and the potential geographical expansion of the conflict, which could lead to the direct or indirect involvement of additional countries.

Energy Dependence and Potential Inflationary Pressures
With regard to energy security, it is noted that Greece does not import oil or natural gas from Iran. Based on 2024 data, natural gas imports (excluding LNG) originated primarily from Russia and Azerbaijan, while more than 60% of oil imports came from Iraq, Kazakhstan, and Libya.

Nevertheless, Greece remains a net energy importer and, as such, is particularly vulnerable to sharp increases in international prices. In 2024, oil, petroleum products, and natural gas accounted for approximately 61% of final energy consumption—one of the highest shares in the European Union.

A prolonged energy disruption could strengthen the energy component of inflation and lead to an increase in the general price level. As observed in 2022 following the outbreak of the war in Ukraine, rising energy costs may be passed through to production and affect a wide range of goods and services, including food. Despite the gradual easing in recent years, the energy component of inflation remains approximately 19.5% higher compared to 2021.

At the same time, a new energy shock could worsen the current account deficit, primarily through a widening of the fuel trade deficit, which constitutes a longstanding structural weakness of the Greek economy.

Tourism: Risks and Potential Opportunities
Tourism represents another significant transmission channel. Heightened uncertainty across the broader Mediterranean region could negatively affect inbound travel flows and tourism revenues, particularly in the cruise sector. However, if the conflict remains geographically confined to the Middle East, Greece could strengthen its position relative to competing destinations, increasing its market share, as was observed in the early 2010s during the period of the Arab Spring.

In any case, the Greek tourism sector has demonstrated considerable resilience in recent years, rebounding rapidly after the pandemic and recording new historical highs in both arrivals and revenues.

Investment and the Recovery Fund
Another factor that may be affected is investment activity, as geopolitical uncertainty and high energy costs could delay the implementation of investment projects. The timing is considered critical, as 2026 marks the final year for the implementation of the European NextGenerationEU programme and the absorption of Recovery and Resilience Facility funds. Member states are required to complete the milestones of their national plans by the end of August in order to ensure full utilization of the available resources.

This strict timetable is also expected to act as an incentive for accelerating investments and supporting economic activity.

Strong Contribution of Investment to Growth
According to the latest data, in 2025 the contribution of investment to economic growth exceeded that of private consumption for the first time since the pandemic. Specifically, investment contributed 1.5 percentage points to GDP growth of 2.1%, compared to 1.4 percentage points from private consumption.

Net exports contributed 1.2 percentage points, while public consumption added 0.1 percentage points, and inventories had a negative impact.

Total investment growth reached 8.9%, with particularly strong expansion in the second half of the year. The largest increases were recorded in residential investment (22.4%), followed by investment in transport equipment (20.8%) and other construction excluding residential (8.3%).

Fiscal Space and Outlook
Despite international uncertainties, the Greek economy possesses significant buffers of stability. Fiscal balance and the primary surpluses of recent years have created fiscal space, which could be utilized to support households and businesses in the event of a deterioration in the economic environment.

Moreover, the statistical carry-over effect from 2025 growth is estimated to add approximately 1.1 percentage points to the 2026 growth rate, strengthening the outlook for the Greek economy. Overall, the outlook remains positive; however, the evolution of geopolitical tensions will be a decisive factor for the economy’s trajectory in the period ahead.