Around this time six years ago, in Greece and many other countries around the world, the first strict social distancing measures were being implemented to combat the COVID-19 pandemic.
It can be argued that the pandemic’s first lockdown “ushered in” a period of successive severe disruptions to the economy—some temporary and others persistent—affecting both the supply side (supply shocks) and the demand side (demand shocks).
As Eurobank notes in its regular economic report, the performance of the Greek economy in terms of growth and other macroeconomic indicators is assessed as satisfactory by official international and domestic organizations
The pandemic was followed by: first, the war in Ukraine and the ensuing energy crisis in 2022; second, hostilities in the Middle East in 2023; third, the rise of protectionist policies in 2025; and, fourth, the ongoing conflict in the Persian Gulf region, which is particularly sensitive to global energy flows.
At the same time, this period was marked by significant interventions in fiscal and monetary policy, aimed at smoothing out economic cycle fluctuations, ranging from the creation of the Recovery and Resilience Fund (RRF) at the European Union level to rapid technological progress in the field of the digital transformation of economies and societies.
Following the steam engine and the railroad in the First Industrial Revolution, oil, the internal combustion engine, electricity, and chemical compounds in the Second Industrial Revolution, and computers, computer science, and the internet in the third industrial revolution, the fourth industrial revolution is now in full swing. Its main tools are artificial intelligence, large data centers, and “smart” robots.
Technological progress, improvements in the quality of institutions, and growth in human capital positively influence aggregate supply and constitute the key pillars for the long-term growth of economies.
2026: upside risks to inflation and downside risks to growth due to military operations in the Persian Gulf region
Over the past three years, reports by official organizations (the European Commission, the International Monetary Fund, and the Organization for Economic Cooperation and Development) on the growth prospects of Greece and many other economies the existence of downside risks to real growth and upside risks to inflation was highlighted, that is, scenarios that could lead to lower growth and higher inflation compared to the baseline scenario of the projections.
These scenarios, beyond the risks stemming from the climate crisis, were primarily linked to a potential escalation of geopolitical tensions and hostilities on active fronts. Over the past four weeks, due to military operations between the United States, Israel, and Iran, these risks have intensified.
The ongoing military operations in the Persian Gulf region and the “closure” of the Strait of Hormuz, one of the most critical chokepoints (chokepoints) of global shipping, have been accompanied by a sharp rise in international prices for oil and natural gas, as well as for products such as fertilizers, which are a key input in agricultural production.
Consequently, they constitute a disruption primarily on the supply side and, to a lesser extent, on the demand side. To the long-standing economic problem of “what will be produced,” “how it will be produced,” and “for whom it will be produced”—a problem that economies solve through the dominant market mechanism combined with necessary government interventions—the current crisis directly affects the “how” as it impacts production costs.
Given the Greek economy’s heavy dependence on imported fossil fuels, a rise in energy prices—provided it is not short-lived—could create forces that slow economic growth, accelerate inflation, and worsen the current account deficit.
The Bank of Greece (BoG), in its recent publication “Note on the Greek Economy,” revised downward its growth forecast for Greece in 2026 to 1.9%, from 2.1% in the December 2025 Interim Monetary Policy Report, while revising inflation upward to 3.1%, from 2.1% previously.
At the same time, the International Monetary Fund (IMF), as part of its Article IV consultation on the Greek economy, lowered its growth forecast to 1.8%, down from 2.0% in its regular “World Economic Outlook” report of Oct-25.
The magnitude of the effects of the current economic turmoil, beyond the policy responses, will depend on the duration, intensity, and geographic scope of the conflicts, as well as the time required to restore global energy and goods flows through the Strait of Hormuz to the status quo ante.
Early 2026 data (before hostilities break out in the Persian Gulf): Positive business sentiment but persistent inflation
Following the Greek economy’s positive performance in the fourth quarter of 2025, the first available data for 2026 indicate an improvement in business expectations, but also persistent inflation. It should be noted that these data pertain to the two-month period of January–February 2026, i.e., the period prior to the outbreak of hostilities in the Persian Gulf region.
In terms of economic sentiment indicators, the economic sentiment index, supported by confidence indices in industry and construction, rose to a six-month high in February 2026 (107.7 points, above the long-term average of 100 points). At the same time, the manufacturing PMI rose to 54.4 points (also a six-month high), remaining firmly above the threshold separating improvement from deterioration in operating conditions for the past three years.
Regarding the general price level, annual inflation in Greece, based on the Harmonized Index of Consumer Prices (HICP), remained close to 3.0% in the first months of 2026, i.e., at levels similar to those of the previous year. According to the Hellenic Statistical Authority (ELSTAT), it stood at 3.1% in Feb-26 (compared to 1.9% in the Eurozone), up from 2.9% in Jan-26.
The general price index for services rose by 4.3% year-on-year, while the corresponding index for goods rose by 2.1%. For goods, inflation in unprocessed food plays a dominant role (12.5% in Feb-26), while for services, housing services stand out (7.3% in Feb-26).
Of the thirteen main categories of goods and services, the“Food and non-alcoholic beverages”category made the largest contribution, by 1.0 percentage point (pp), to inflation in Feb-26. This was followed by the categories: “Hotels, cafes, and restaurants” (0.9 pp), “Housing, water, electricity, gas, and other fuels” (0.4 pp), “Clothing and footwear” (0.4 percentage points), and “Transportation” (0.3 percentage points).