Greece is maintaining its fiscal course, with public debt on a steady downward path and the prospect of further credit rating upgrades remaining open. That is the main conclusion of an analysis by Citi Research, entitled “Greece: Staying on the right fiscal path”. It recognises the improvement in public finances, while noting that the high level of debt remains a key structural feature of the Greek economy.
According to the US firm’s estimates, Greek public debt is expected to fall to 138% of GDP in 2026 and 131% in 2027, compared with government forecasts of 137% and 129%, respectively. This decline is seen as crucial to strengthening the country’s access to international markets, as loans on favourable terms gradually account for a smaller share of total public debt.
At the same time, Citi estimates that further debt reduction is a necessary condition for a new cycle of upgrades to Greece’s credit rating, which could begin in the second half of 2027.
Early repayments
The analysis pays particular attention to public debt management and the use of the country’s substantial cash reserves. As Citi notes, Greece has made significant early repayments of its loan obligations, which are estimated to reach about €12.8bn in 2026.
These repayments include not only loans under the Greek Loan Facility (GLF) and the EFSF, but also Greek government bonds maturing in 2027, through buybacks.
This further reduces the country’s financing needs in the coming years and makes Greece less sensitive to market interest rate fluctuations. The favourable structure of its debt, together with political consensus on the need to reduce it and the strong economic growth of recent years, were key factors in the fiscal adjustment.
Growth forecasts
On the macroeconomic outlook, Citi describes the draft 2027 budget as broadly in line with its estimates, although slightly optimistic.
The government forecasts growth of 2% in 2026 and 2.3% in 2027. The US firm, by contrast, takes a more conservative view, putting Greek GDP growth at 1.8% in both years.
It also expects some deterioration in both the primary balance and, consequently, the general government’s overall fiscal balance in 2026 and 2027.
This is attributed mainly to the package of fiscal measures, worth about 0.7% of GDP, announced at the Thessaloniki International Fair, as well as recent support measures introduced in response to rising energy prices.
However, Citi expects Greece to continue recording primary surpluses in the coming years, while the overall fiscal balance is expected to move into a small deficit in 2028.
Recovery Fund
Citi sees no significant short-term fiscal risks for Greece, but notes that some important questions may arise over the medium term.
As it points out, in line with developments in other economies on Europe’s periphery, Greece’s growth in recent years has relied to a significant extent on the absorption of funds from NextGenerationEU, the EU’s Recovery Fund.
The country still has funds available under the programme, with a significant share of spending expected to take place between now and 2027, and possibly in 2028 as well. Citi therefore expects growth momentum to remain relatively strong, while supporting public finances during a transitional period for Greece and the European Union as a whole.
By contrast, the contribution of the European SAFE programme is expected to be limited. Greece has secured an allocation of about €787m, an amount that, according to the analysis, is not expected to have a significant effect on growth rates.
According to Citi, the big question now concerns the 2028-29 period: whether the Greek economy will be able to sustain its growth rates without the same strong support from European funds.
The firm is cautiously optimistic about this prospect, recognising that reforms in recent years, funds that can still be put to use and improved fiscal credibility create favourable conditions.
However, it warns that persistent external imbalances and adverse demographic trends remain significant challenges that must be addressed to ensure the country’s sustainable growth path.