The Foundation for Economic and Industrial Research (IOBE) has identified persistent inflation, which remains consistently higher than in the eurozone, as one of the biggest challenges facing the Greek economy. It has kept its forecast for growth at 1.8% in 2026, but made a slight downward revision to its estimate for 2027, to 1.9% from 2%.
Presenting its third quarterly report on the Greek economy, IOBE director-general Nikos Vettas said the country continued to record positive growth, unemployment was falling and tourism was proving resilient. However, he stressed that structural weaknesses inherited from the prolonged economic crisis remained, while the international environment was creating new pressures.
Inflation and the gap with the eurozone
Mr Vettas placed particular emphasis on price trends, noting that the gap between Greek and eurozone inflation appeared to be becoming entrenched rather than narrowing.
As he explained, the Greek economy had higher inflation than the eurozone even before the 2008 crisis, while the current picture reflects, among other things, the fact that demand has risen faster than supply.
IOBE estimates that inflation, as measured by the Harmonised Index of Consumer Prices, will reach 4% in 2026, up from 2.9% in 2025. It forecasts a decline to 3% in 2027, provided there are no significant changes.
Pressures are coming mainly from energy, but are spreading to services such as housing, restaurants, tourism and transport. Mr Vettas also noted that the introduction of measures such as the Digital Work Card was increasing the reported costs of businesses that had previously operated partly in the informal economy.
Internationally, continuing tensions in the Middle East and the war in Ukraine are keeping uncertainty elevated, with energy and financing costs posing significant risks.
Consumption with no room to save
Data on the behaviour of Greek households are particularly striking. According to Mr Vettas, the savings rate was negative, at -2.4% of disposable income in 2024, indicating that households as a whole are spending more than their disposable income.
The picture differs considerably from that in the eurozone. The real volume of consumption by Greek households was 14.1% higher in 2025 than in 2019, compared with 5.3% in the eurozone.
However, a significant share of consumption in Greece goes on goods, particularly non-durable products such as food, and less on services.
In the IOBE director-general’s view, this pattern, together with limited capacity to save, raises questions about the sustainability of consumer momentum in the coming years.
Investment and what comes after the Recovery Fund
IOBE expects gross fixed capital formation to rise by 6.5% in 2026 and by 4% in 2027.
Although investment activity is growing faster than in the rest of Europe, Mr Vettas noted that the investment gap with Europe has yet to be closed.
The completion of the Recovery Fund is an additional challenge. According to the report, increased national funding for the Public Investment Programme will only partly offset the end of European funding.
At the same time, higher borrowing costs and inflationary pressures are weighing on the prospects for investment and private consumption.
For 2027, IOBE’s estimate of 1.9% growth falls short of the 2.3% forecast in the draft state budget.
Unemployment falls, with only modest gains in real pay
In the labour market, the unemployment rate fell to 7.9% in the second quarter of 2026, from 8.6% a year earlier. IOBE forecasts a further decline to 8.6% for 2026 as a whole and to 7.8% in 2027.
However, growth in real pay remains modest.
At the same time, Greece continues to lag significantly behind the eurozone in the share of its population participating in the labour market.
Public debt, the external deficit and the stock market
IOBE sees a stable picture in public finances, while the state budget targets a primary surplus of 3.6% of GDP in 2026 and 3.3% in 2027
Public debt is forecast to fall to 136.7% of GDP this year and to 128.8% next year.
Mr Vettas noted that Greece was no longer seen by markets as the exception it had once been, but warned that the gradual increase in the share of debt held by markets would make investor confidence more important.
IOBE reports a deterioration in the current account deficit, to €9.3 billion in the first seven months of 2026, from €7.8 billion in the same period of 2025. As its director-general noted, more concerning than the recent change is the deficit’s persistently high level.
The picture is more positive for the Greek capital market. Market capitalisation is once again approaching €200 billion, around the level it stood at in 2027, while the presentation recorded an increase in capital raised through the market, with a corresponding forecast of €6.1 billion in 2026.
According to Mr Vettas, the convergence of yields on bank bonds with those on Greek government securities reflects a significant improvement in investors’ perception of the country’s risk.
The overall picture, however, remains complex. The Greek economy continues to grow, but persistent inflation, financing costs and the need to strengthen the productive base are emerging as key challenges for the period ahead.