Greece posted exceptionally strong fiscal performance in 2025 as well, for the fourth consecutive year, achieving a primary surplus of 4.9% of GDP—the highest on record based on available data and the largest in the EU for 2025.
The average overachievement relative to the (upwardly revised) annual targets incorporated for the 2022–25 period in the respective Stability Programs and Annual Progress Reports approached 2.0% of GDP annually, strengthening fiscal credibility in an extremely volatile international environment. In the first four months of 2026, the General Government surplus (on a modified cash basis) increased by €1.4 billion annually, signaling further overperformance, even when certain one-off positive effects are excluded.
The Economic Analysis Division of the National Bank of Greece (NBG) seeks to examine the key factors underpinning this exceptionally strong performance and to assess the fiscal outlook for 2026, as well as for the coming years.
According to our analysis, tax revenues played a pivotal role, accounting for approximately two-thirds of the cumulative overperformance over the past four years. Total revenue from taxes and social security contributions increased cumulatively by €27.1 billion (+37.8%) between 2022 and 2025 and stabilized at historically high levels (40% of GDP), exceeding the EU average for the first time. Excluding social security contributions, tax revenues increased by €22 billion, reaching a historic high of 28.4% of GDP (a cumulative increase of 2.2% of GDP over the past four years).
The combined increase in revenue from VAT and personal and corporate income taxes (as a percentage of GDP) amounted to 3.6 percentage points (pp), more than offsetting the 1.4 pp decline in other categories of tax revenue (primarily property taxes and “other taxes” on goods, due to lower rates as well as changes in the composition of final demand).
In terms of the composition of the increase, VAT made the most significant contribution, with revenue from this tax rising by 10.0% annually in 2025 and by 12.0% annually, on average, over the 2022–25 period. VAT revenue, as a percentage of GDP, followed a steady upward trend, reaching 9.5% in 2025—a historic high—compared to an average of 7.2% in the EU, while in absolute terms they increased by €8.4 billion over the last four years (or by 1.3% of GDP). The higher level of VAT revenue, as a percentage of GDP, compared to the EU reflects the fact that Greece has a slightly higher average tax rate on final consumer spending —17.9% versus 16.5% for the EU—a larger share of private consumption in GDP (69% versus 53% in the EU), as well as improved tax efficiency, as analyzed below. However, given that the structure and rates of this tax have remained constant in recent years, the significant increase in the ratio of VAT revenue to GDP should be attributed to the following factors:
• According to our analysis, the increase in private consumption at constant prices (+4.0% annually on average) during the 2022–25 period accounts for nearly half (approximately 0.7% of GDP) of the average annual increase in deflated VAT revenue over the same period.
• The strong upward trend in revenue from inbound tourism (+25.0% annually over the 2022–25 period) contributed to an estimated €0.3 billion increase in annual VAT revenue —through increased spending by non-residents on goods and services—accounting for 0.25 percentage points of the cumulative increase in tax revenue as a percentage of GDP.
• At the same time, the gradual shift in the structure of domestic consumption toward expenditure categories subject to higher VAT rates—primarily services, durable consumer goods, equipment, and capital goods—contributed an additional 0.1 percentage points to the increase in VAT revenue as a percentage of GDP.
Overall, the above factors account for approximately three-quarters of the increase in the ratio of VAT revenue to GDP. The remainder reflects positive effects from increased tax compliance, as evidenced by the reduction in the “VAT compliance gap” to levels below 10% of potential revenue by 2025, now at a level similar to the EU average (down from approximately 25.0% in 2018, according to European Commission estimates). This improvement contributed to a cumulative increase in revenue of €1.5 billion over the 2022–25 period.
Revenue from personal income tax recorded an average annual increase of 13.2% during the 2024–2025 period and by 1.1% of GDP cumulatively over the last four years, reaching a historic high of 6.9% of GDP in 2025. It should be emphasized that, despite the fact that the nominal personal income tax rates by income bracket are at levels comparable to those of other eurozone countries, the share of related revenue in GDP still lags significantly behind the EU average (6.9% in 2025 compared to 9.8% in the EU).
This mainly reflects the fact that more than 40.0% of taxpayers—based on the latest available detailed data from tax returns for 2023 income —report incomes close to or below the indirect tax-free threshold (for employees and retirees with specific family characteristics) of €8,600 per year. This percentage deviates significantly from the EU average—even from Portugal, for which data is available and which is comparable to Greece in terms of certain social indicators—and was exceptionally high even before the onset of the Greek crisis.
The increase in personal income tax revenue is mainly attributed to: i) the rise in workers’ deflated wages (as measured by the LCI index at constant prices), which averaged 1.7% per year over the previous four-year period, ii) an increase in employment of 2.5% per year, on average, over the same period, and iii) an upward trend in other income categories (rents, interest, dividends).
The total value of the personal income tax base, including employee compensation, gross household income, and pension benefits, is projected to grow at an estimated average annual rate of approximately 5.0% over the 2022–25 period, in current prices, compared with an average annual increase in related revenue of 12.5%. The positive divergence between revenue growth and the expansion of the tax base reflects, first and foremost, improved tax efficiency and, secondarily, the effect of taxpayers moving into higher tax brackets due to an increase in their nominalincome.
In this context, with the aim of providing relief to the middle class, an average reduction in the personal income tax rate of approximately 1.5 percentage points was implemented starting in January 2026 for those reporting an annual income of more than €10,000, corresponding to an annualized fiscal relief of €1.6 billion. At the same time, the tax reform also includes even greater and targeted relief for specific population groups, such as younger taxpayers and families, where the relief rate is linked to the number of dependent children.
Revenue from corporate income tax also recorded a strong average annual increase of 24.4% during the 2022–25 period, corresponding to a cumulative increase of €4.2 billion, or approximately 1.2% of GDP. Among the key factors explaining this performance is the sharp rise in the profitability of non-financial corporations, with their gross operating surplus growing at an average annual rate of 9.9% between 2022 and 2025 (remaining close to a 10-year high, at 13.5% of GDP during the same period).
Furthermore, the acceleration in the creation of new businesses and the decline in informal entrepreneurship contributed to the rise in revenue. According to ERGANI data, the number of businesses with a corporate legal structure reached 97,400 in 2025 (up from 84,200 in 2022), while the number of sole proprietorships declined marginally. This led to higher reported corporate profits and a shift from the gross income component toward gross operating surplus, which is typically associated with purely business activity.
At the same time, as with the previous tax categories, the annual percentage increase in corporate income tax revenue significantly exceeded the estimated average annual growth of the corresponding tax base for the period 2022–25 (+19.4%, excluding one-time taxes on windfall profits in the refining and energy production sectors, compared with an increase of 10.7%, on average, for the estimated tax base of this specific tax), indicating a significant improvement in tax efficiency.
Our analysis of the main categories of tax revenue collectively shows that nearly 40% of the increase in revenue from VAT and personal and corporate income taxes, during the 2022–25 period, reflects improvements in efficiency, while key macroeconomic factors—such as growth in deflated consumption, profits, real wages, and tourism activity, as well as changes in the composition of final demand and the structure of entrepreneurship—account for the remainder of the growth. In this context, revenue growth is expected to remain robust, driven by structural improvements, even as favorable cyclical factors and inflation tend to fade as the economy converges toward its potential growth rate.
The strong performance mentioned above largely reflects the cumulative benefits of the structural fiscal reforms implemented over the past decade, and have been reinforced in recent years through additional measures to improve tax compliance and efficiency, using even more advanced methods and completing key reforms (such as the mandatory acceptance of payments via POS terminals, the interconnection of cash registers with POS terminals, the introduction of the digital work card, the universal implementation of the myDATA platform, electronic invoicing and e-filing, as well as targeted audits based on risk analysis, among others).
The effectiveness of these measures was further enhanced by favorable macroeconomic conditions, as well as by the steady growth of electronic payments, the value of which has surged over the past decade, reaching approximately 30.0% of GDP in 2025 from 9.3% in 2016, contributing to increased revenue, particularly from VAT. In this context, maintaining this positive momentum and further enhancing tax efficiency could secure additional fiscal space to finance new tax cuts after 2027.
For example, a further reduction of the VAT compliance gap by one-third from its current level of approximately 10%, combined with a corresponding convergence (by one-third) relative to Portugal in terms of the share of personal income reported below the tax-free threshold or taxed at the minimum rate, could collectively generate additional tax revenue of more than €2.0 billion annually.
The credible containment of primary expenditures played a decisive role in fiscal performance, with their share of GDP falling to a multi-year low in 2024–25, following the gradual phasing out of the extraordinary support measures adopted during the pandemic and the energy crisis, as well as through effective control of key expenditure categories.
Specifically, primary expenditures fell to 45.1% of GDP in 2024–25 (compared to the EU average of 47.4%), after peaking at 56.3% in 2020 and compared to an average of 49.0% over the previous decade. Excluding expenditures related to public investment—which are financed, to a very large extent, by capital inflows from the EU—the gap widens further, with primary expenditures in Greece falling to 37.7% of GDP compared to 42.6% for the EU in 2025.
The significant improvement in both tax revenues and expenditures is already reflected in the four-month implementation of the General Government budget, with the primary surplus exceeding last year’s level for the same period by 0.5% of GDP. An analysis of the individual components of revenue and expenditure in previous years, as well as the current fiscal trajectory, points to a surplus of approximately 4.0% of GDP for 2026, compared to an upwardly revised target of 3.2% of GDP in the 2026 Annual Progress Report.
Accordingly, the primary surplus for 2027 is projected at 3.5%, compared to a target of 2.7% incorporated in the 2026–29 MFF. The above estimates take into account measures announced through June 2026. The projected performance is expected to reflect additional structural improvements in tax efficiency, which are also taken into account in setting future primary expenditure targets agreed with the EU under the new fiscal rules, as well as in assessing the possibility of implementing new tax cuts.
Given the pivotal role of public debt in the country’s fiscal assessment and the consideration of the future trajectory of the debt-to-GDP ratio in setting primary expenditure targets (in accordance with the new fiscal rules), it is important to emphasize that overachievement increases the country’s medium-term fiscal flexibility both directly —by widening the margin for favorable adjustment of future fiscal targets—as well as indirectly, through credit rating upgrades and lower refinancing costs, as well as improved overall financing conditions in the economy.
In this context, the high primary surpluses of recent years have reduced Greece’s public debt-to-GDP ratio by approximately 12 percentage points over the past four years—compared to a total reduction of 51 percentage points in Greece’s debt-to-GDP ratio between 2022 and 2025—leading to corresponding outperformance in terms of debt reduction, without taking into account the indirect impact of lower borrowing costs.
Under the current fiscal and macroeconomic trajectory—with the average primary surplus projected to stand at 3.0% of GDP during the period 2027–2029 and assuming nominal GDP growth of approximately 4.0% on an annual basis—the debt-to-GDP ratio is projected to decline further, by more than 20 percentage points and to below 120% of GDP by 2029, incorporating the latest available information regarding plans for early debt repayments related to the support programs of the previous decade.
The full text of the analysis is available at the following link:
https://www.nbg.gr/el/omilos/meletes-oikonomikes-analuseis/elliniki-oikonomia-nea/eidika-themata