Greek economy: The positive scenario after the US-Iran agreement

A memorandum of understanding between the United States and Iran is raising expectations of further declines in energy prices, with potentially positive implications for the global economy and, by extension, Greece, according to a new assessment by the Bank of Greece (BoG).

The central bank estimated that under a more favorable scenario, Greece’s economic growth could reach 2.0% in 2026 and 2.1% in both 2027 and 2028, while inflation could ease from 3.7% in 2026 to 2.5% in 2027.

At the same time, the Bank of Greece warned that economic growth remains exposed to several risks, including more persistent inflationary pressures, natural disasters linked to climate change, lower-than-expected absorption and utilization of Recovery and Resilience Facility funds, and delays in implementing key structural reforms.

A softer economic scenario

According to the Bank of Greece, the recent agreement between Washington and Tehran has strengthened expectations that hostilities in the region could subside, paving the way for lower energy prices. Such a development would increase the likelihood of a more favorable economic outcome than the baseline scenario currently envisaged.

Under this softer scenario, inflation would be slightly lower while real economic indicators would perform better than in the baseline projections. The central bank expects a faster decline in international oil and natural gas prices, easing pressures on households and businesses.

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Growth is projected at 2.0% in 2026, rising to 2.1% in both 2027 and 2028. Inflation, measured by the Harmonised Index of Consumer Prices (HICP), is forecast at 3.7% in 2026, before falling to 2.5% in 2027 and 2.2% in 2028.

By comparison, the Bank of Greece’s baseline scenario projects economic growth of 1.9% in 2026 and 2027, accelerating to 2.0% in 2028. Inflation is expected to reach 3.8% in 2026 before easing to 2.6% in 2027 and 2.3% in 2028.

The central bank stressed, however, that the realization of the more favorable scenario depends largely on the consistent implementation of the US-Iran agreement and the full restoration of energy flows.

Key challenges ahead

According to the Bank of Greece, the main short-term challenges facing the Greek economy include controlling inflation, accelerating investment activity, addressing emerging labor shortages and skills mismatches, designing adaptation strategies for climate change, implementing natural disaster prevention measures, safeguarding energy security through investments in clean energy, and maintaining fiscal sustainability.

Over the medium and long term, the central bank identifies several critical priorities:

• Maintaining primary fiscal surpluses over an extended period to ensure the sustainability of public debt.
• Implementing structural reforms that support long-term economic growth.
• Addressing the current account deficit by strengthening the competitiveness of the Greek economy and expanding the export base with higher value-added products and services.
• Sustaining the pace of reforms and improving public asset management in order to attract more foreign direct investment.
• Promoting innovation, education and knowledge capital development.

Current account deficit remains a concern

The Bank of Greece noted that the current account deficit is expected to widen in 2026 due to higher fuel prices before returning to a downward trajectory from 2027 onward.

In addition, stronger domestic investment activity, supported by projects financed through the Recovery Fund, is expected to increase imports of capital goods and weigh on the trade balance in the short term.

On the positive side, higher tourist arrivals, the extension of the tourism season, the opening of new markets and the continued expansion of the cruise sector are expected to boost travel service revenues from 2027 onwards, providing support to the external balance and overall economic activity.