IOBE maintains Greece’s 2026 growth forecast at 1.8%, sees inflation near 4%

At the same time, inflation is expected to approach 4% this year, driven by rising energy prices and continued instability in the Middle East.

According to the forecasts presented alongside IOBE’s quarterly report, inflation is expected to continue easing in 2027, with the rate of price increases declining to around 3%. This gradual moderation is projected to begin in the second quarter of next year, although the outlook remains uncertain.

In particular, a potential escalation of armed conflicts could exert renewed upward pressure on prices, both through higher energy costs and through secondary effects on production and supply chains.

In the labour market, IOBE estimates that the unemployment rate will stand at around 8.6% in 2026 before declining further to 7.8% in 2027.

Challenges Facing the Greek Economy

IOBE Chairman of the Board Giannis Retsos stressed during the presentation of the report that fiscal stability remains a priority and a fundamental prerequisite for sustaining the recovery in investor confidence, both in Greece and across Europe.

Meanwhile, IOBE Director General and Professor Nikos Vettas noted that positive trends in the Greek economy are being confirmed, although they are unfolding amid prolonged and intensifying uncertainty.

Internationally, ongoing military operations in Ukraine and the Middle East, combined with political developments in the European Union and the United States, are increasing risks to economic activity. Key challenges include rising and volatile energy costs, higher financing costs and the limited fiscal capacity of major advanced economies.

For Greece, positive factors include faster economic growth than the euro area average, improvements in the labour market, fiscal discipline, and the resilience of consumption and tourism.

Nevertheless, significant structural weaknesses persist, including higher inflation than in the euro area, the composition of investment, the external deficit and low productivity. In addition, the investment gap, adverse demographic trends and the large stock of non-performing debt continue to weigh on the country’s medium-term economic outlook.

Targeted Measures to Address Inflation

IOBE places particular emphasis on the design of measures to support households in the face of inflationary pressures. As highlighted in the report, direct and targeted transfers may prove more effective than subsidies that reduce the final prices of goods, which could undermine the price-setting mechanism.

Coordination of the relevant policies at both European and national levels is therefore considered crucial, particularly at a time when developments in energy markets are adding to uncertainty surrounding the cost of living.

European Competitiveness and Investment

Nikos Vettas also highlighted the importance of developments at the European level for Greece’s economic prospects. The need to strengthen the European Union’s competitiveness while preserving social cohesion was already underscored in the 2024 Draghi Report.

However, significant shortcomings remain in the development of human and physical capital, as well as in the establishment of a coherent policy framework to strengthen the European economy.

In this context, the preparation of the EU’s new budget and the Multiannual Financial Framework for the 2028–2034 period represents a critical issue.

For Greece, a key priority remains strengthening the investment base and boosting productivity through reforms designed to deliver long-term results. The objective is to gradually transition towards a more productive economic model that relies increasingly on higher-value-added activities, thereby supporting sustainable growth and enhancing the economy’s competitiveness.