Greece recorded very strong fiscal performance in 2025 as well, for the 4th consecutive year, achieving a primary surplus of 4.9% of GDP − the highest historically based on available data and the largest in the EU for 2025.
The average outperformance relative to the (upwardly revised) annual targets that had been incorporated for the period 2022-25 in the respective Stability Programmes and Annual Progress Reports, approached 2.0% of GDP annually, strengthening fiscal credibility in an extremely unstable international environment. In the first 4 months of 2026, the General Government surplus (on a modified cash basis) increased by €1.4 billion year-on-year, pointing to new outperformance, even if certain extraordinary positive effects are excluded.
The NBG Economic Analysis Division seeks to investigate the main factors that supported this very strong performance and to assess the fiscal prospects for 2026, as well as for the coming years.
According to our analysis, tax revenues played a pivotal role, explaining about 2/3 of the cumulative outperformance during the previous four-year period. Total revenues from taxes and social security contributions increased cumulatively by €27.1 billion (+37.8%) in the period 2022-25 and stabilized at historically high levels (40% of GDP), exceeding the EU average (avg.) for the first time. Excluding social security contributions, tax revenues increased by €22 billion, reaching the historical high of 28.4% of GDP (an increase of 2.2% of GDP, cumulatively, over the last four years).
The combined increase in revenues from VAT and income taxes on individuals and legal entities (as a percentage of GDP) amounted to 3.6 percentage points (p.p.), more than offsetting the 1.4 p.p. decline in other categories of tax revenues (mainly in real estate and in “other taxes” on products, due to lower rates, but also changes in the composition of final demand).
As regards the structure of the increase, VAT made the most significant contribution, with receipts from this tax increasing by 10.0% year-on-year in 2025 and by 12.0% year-on-year, on avg., in the period 2022-25. VAT revenues, as a percentage of GDP, followed a steadily upward path, reaching 9.5% in 2025 − a historically high level − compared with an EU avg. of 7.2%, 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 revenues, as a percentage of GDP, compared with the EU reflects the fact that Greece shows a slightly higher weighted average tax rate on final consumer expenditure – 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, with the structure and rates of this tax remaining unchanged in previous years, the significant strengthening of the ratio of VAT revenues to GDP should be attributed to the following factors:
• According to our analysis, the increase in private consumption in constant prices (+4.0% annually on avg.) in the period 2022-25 explains almost half (about 0.7% of GDP) of the average annual increase in deflated VAT revenues during the same period.
• The strongly upward trend in revenues from inbound tourism (+25.0% year-on-year in the period 2022-25) contributed to an increase in VAT receipts estimated at €0.3 billion annually – through increased spending by non-residents on goods and services – explaining 0.25 p.p. of the cumulative increase in tax revenues, 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 – mainly services, durable consumer goods, equipment and capital goods – contributed an additional 0.1 p.p. to the increase in VAT revenues, as % of GDP.
Overall, the above factors explain about ¾ of the increase in the ratio of VAT revenues to GDP. The remainder reflects positive effects from increased tax compliance, as evidenced by the reduction of the VAT “compliance gap” to levels below 10% of potential revenues for 2025, now at a similar level to the EU avg. (from about 25.0% in 2018, according to estimates by the European Commission). This improvement contributed to a cumulative increase in revenues of €1.5 billion in the period 2022-25.
Revenues from personal income tax recorded an average annual increase of 13.2% in the period 2024-2025 and by 1.1% of GDP cumulatively over the last four years, reaching the historical high of 6.9% of GDP in 2025. It should be emphasized that, despite the fact that nominal personal income tax rates by income bracket are at levels comparable to other euro area countries, the share of the relevant revenues in GDP still falls significantly short of the EU avg. (6.9% in 2025 versus 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 incomes – declare incomes close to or lower than the implicit tax-free threshold (for employees and pensioners with specific family characteristics) of €8,600 annually. This percentage deviates significantly from the EU avg. – even from Portugal, for which data are available and which is comparable to Greece in certain social indicators – while it was extremely high even before the onset of the Greek crisis.
The increase in personal income tax revenues is mainly attributed to: i) the strengthening of employees’ deflated earnings (as approximated by the LCI index in constant prices), which amounted to 1.7% annually, on average, over the previous four-year period, ii) the increase in employment by 2.5% annually, on avg., over the same period, and iii) the upward trend in the remaining income categories (rents, interest, dividends).
The total value of the tax base of personal income tax, including employees’ earnings, households’ mixed income and pension benefits, increased at an estimated average annual rate of about 5.0% in the period 2022-25, at current prices, compared with an average annual increase in the relevant revenues of 12.5%. The positive divergence between revenue growth and the strengthening of the tax base primarily reflects the improvement in tax efficiency and secondarily the effect of taxpayers shifting into higher brackets due to the increase in their nominal incomes.
In this context, with the aim of relieving the middle class, an average reduction in the personal income tax rate of about 1.5 p.p. for those declaring income above €10,000 annually was implemented from January 2026, which corresponds to an annualized fiscal relief of €1.6 billion. At the same time, the tax reform includes even greater and targeted relief for population groups such as younger taxpayers and families, where the relief rate is linked to the number of dependent children.
Revenues from the taxation of business profits also recorded a strong average annual increase of 24.4% in the period 2022-25, corresponding to a cumulative increase of €4.2 billion or about 1.2% of GDP. Among the main factors explaining this performance is the sharp rise in the profitability of non-financial corporations, with their gross operating surplus increasing at an average annual rate of 9.9% between 2022-25 (remaining close to a 10-year high, at 13.5% of GDP over the same period).
In addition, the acceleration in the establishment of new businesses and the shrinking of informal entrepreneurship contributed to the rise in revenues. According to ERGANI data, the number of businesses with a corporate legal form rose to 97.4 thousand in 2025 (from 84.2 thousand in 2022), while the number of sole proprietorships declined marginally. This led to higher declared corporate profits and a shift from the mixed income component toward gross operating surplus, which is usually associated with purely business activity.
At the same time, as in the previous tax categories, the annual percentage increase in revenues from corporate income tax significantly exceeded the estimated average annual increase in the corresponding tax base in the period 2022-25 (+19.4%, excluding extraordinary taxes on windfall profits in the refining sector and in energy production, versus an increase of 10.7%, on avg., for the estimated tax base of this tax), indicating a significant strengthening of tax efficiency.
From our analysis of the main categories of tax revenues, it emerges jointly that almost 40% of the increase in revenues from VAT and income taxes on individuals and legal entities in the period 2022-25 reflects improvements in efficiency, while the main macroeconomic factors − such as the increase in deflated consumption, profits, real wages, and tourism activity, as well as changes in the composition of final demand and the structure of entrepreneurship − explain the remaining part of the increase. In this context, revenue dynamics are expected to remain resilient, due to the boost from structural improvements, even if favorable cyclical factors as well as inflation tend to weaken as the economy converges toward its potential growth rate.
The aforementioned strong performance largely reflects the cumulative benefits from structural fiscal reforms implemented over the previous decade, and strengthened in recent years, through additional measures to improve tax compliance and efficiency, using even more advanced methods and completing pivotal reforms (such as the mandatory acceptance of payments via POS, the interconnection of cash registers with POS, the introduction of the digital work card, the universal application of the myDATA platform, electronic invoicing and e-filing, as well as targeted audits based on risk analysis, among others).
The effectiveness of the above interventions was further strengthened by favorable macroeconomic conditions, as well as by the continuous increase in electronic payments, the value of which surged over the last decade, to about 30.0% of GDP in 2025 from 9.3% in 2016, contributing to the strengthening of revenues, especially from VAT. From this perspective, maintaining the positive momentum and further strengthening tax efficiency could ensure additional fiscal space to finance new tax cuts after 2027.
Indicatively, a further reduction of the VAT compliance gap by 1/3 from the current level of about 10%, combined with a corresponding convergence (by 1/3) toward Portugal as regards the percentage of personal incomes declared below the tax-free threshold or taxed at the minimum rate, could yield, cumulatively, additional tax revenues of more than €2.0 billion annually.
The credible containment of primary expenditures played a decisive role in fiscal performance, with their share in GDP declining to a multi-year low in the period 2024-25, following the gradual withdrawal of the extraordinary support measures adopted during the pandemic and the energy crisis, as well as through effective control of the main expenditure categories.
Specifically, primary expenditures declined to 45.1% of GDP in the period 2024-25 (compared with 47.4% for the EU avg.), after peaking at 56.3% in 2020 and versus an avg. of 49.0% in the previous decade. Excluding expenditures related to public investment – which are financed, to a very high degree, by capital inflows from the EU – the gap widens further, with primary expenditures in Greece declining to 37.7% of GDP versus 42.6% for the EU in 2025.
The significant improvement in both tax revenues and expenditures is already reflected in the implementation path of the General Government budget in the first 4 months, with the primary surplus exceeding its level of the same period last year by 0.5% of GDP. The analysis of the individual components of revenues and expenditures in previous years, as well as the current fiscal trajectory, are consistent with a surplus of about 4.0% of GDP for 2026, versus an upwardly revised target of 3.2% of GDP in the Annual Progress Report for 2026.
Accordingly, the primary surplus for 2027 is projected at 3.5%, versus a target of 2.7% incorporated in the MTFS 2026-29. The above estimates take into account measures that had been announced up to June 2026. The projected performance is expected to reflect additional structural improvement in tax efficiency, which is 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 activating new tax cuts.
Given the pivotal role of public debt in the country’s fiscal assessment and the consideration of the future path of the debt-to-GDP ratio in setting targets for primary expenditures (under the new fiscal rules), it is important to emphasize that the outperformance increases the country’s medium-term fiscal flexibility both directly – through widening the margin for favorable adjustment of future fiscal targets – and indirectly, through credit rating upgrades and its reduced refinancing cost, as well as the improvement of broader financing conditions in the economy.
In this context, the high primary surpluses of recent years reduced the public debt-to-GDP ratio by about 12 p.p. over the last 4 years − versus a total decline of 51 p.p. in Greece’s debt-to-GDP ratio between 2022-25 − leading to corresponding outperformance also in terms of debt reduction, without taking into account the indirect effect from the reduction in borrowing costs.
Under the current fiscal and macroeconomic trajectory − with the average primary surplus estimated to stand at 3.0% of GDP in the period 2027-2029 and assuming nominal GDP growth of about 4.0% annually − the debt-to-GDP ratio is projected to decline further, by more than 20 p.p. and to below 120% of GDP by 2029, also incorporating the latest available information regarding the planning of early debt repayments related to the support programmes of the previous decade.
The full text of the analysis is available at the following address:
https://www.nbg.gr/el/omilos/meletes-oikonomikes-analuseis/elliniki-oikonomia-nea/eidika-themata