Greece’s Economic Outlook: Stability Amid Global Challenges

Introduction

Greece’s economy demonstrates notable resilience and growth potential despite global economic uncertainties and new challenges.

Far from the financial turmoil suggested in recent rumors, current data points to a stable economic trajectory with optimistic growth projections, though specific challenges remain for the Mediterranean nation.

Current Economic Performance and Projections

Greece’s economy is showing remarkable strength compared to its European counterparts.

According to the Bank of Greece projections for February 2025, the Greek economy is expected to grow by 2.5% in 2025 and 2.3% in 2026, significantly outpacing the euro area average.

The International Monetary Fund (IMF) provides a slightly more conservative estimate, projecting 2.1% growth for 2025, primarily driven by investment. The European Commission’s forecast aligns with these figures, predicting growth of 2.3% in 2025 and 2.2% in 2026.

The key drivers of this economic expansion include

Investment spending, supported by European funds

Private consumption growth due to strengthened real disposable income

Employment growth in a tight labor market

Minimum wage increases

Lower inflation compared to previous years

Furthermore, the expected reduction in the public debt-to-GDP ratio to below 150% in 2025, alongside primary fiscal surpluses, is anticipated to improve the investment climate and further sovereign credit rating upgrades.

Wage Trends and Labor Market

Contrary to assertions about declining wages, Greece is experiencing positive wage growth.

The minimum wage in the private sector is expected to increase by approximately 4.5% by 2025, reaching around €867.35.

This is part of the government’s plan to raise the minimum wage to €950 by 2027 gradually.

Public sector salaries are also set to see a 4.5%-5% increase in 2025, with adjusted entry-level wages across various categories. These wage increases reflect the government’s efforts to address inflation impacts and rising living costs.

The unemployment rate, which has been steadily declining, is expected to continue its downward trend, albeit slower than in previous years.

Projections indicate unemployment will fall from 10.4% in 2024 to 9.8% in 2025 and 9.2% in 2026.

Debt Trajectory and Fiscal Performance

While still among the highest in the eurozone, Greece's public debt has significantly improved.

Since 2020, Greece’s debt has decreased by over 40 percentage points, reaching 154% of GDP by 2024, with further reductions expected.

The European Commission projects the debt-to-GDP ratio will continue declining to approximately 142.7% by 2026.

Credit rating agencies have recognized this positive debt trajectory.

In March 2025, DBRS Morningstar upgraded Greece’s credit rating to ‘BBB’ from ‘BBB low,’ citing a healthier banking sector and the continued reduction in the country’s general government debt ratio.

Historical Context: Past IMF Bailouts

It’s important to note that Greece received financial assistance during its previous debt crisis. The European Central Bank, the European Commission, and the IMF bailed Greece twice following the 2008 economic crash.

However, this historical context differs significantly from the current economic situation, which shows stronger fundamentals and a more positive outlook.

EU Support and Recovery Funding

The European Union substantially supports Greece through various programs, notably the Recovery and Resilience Facility (RRF).

Greece’s National Recovery and Resilience Plan, dubbed ‘Greece 2.0,’ has a budget of €35.95 billion and includes 105 investments and 77 reforms structured around five pillars: Green Transition, Digital Transformation, Employment-Skills-Social Cohesion, Private Investments and Economic Transformation, and REPowerEU.

Greece’s share of the Recovery and Resilience Fund amounts to 4.5% of the total, more than double Greece’s share of the euro area's GDP. The fund is expected to support economic activity until 2026.

This disproportionately large allocation reflects the EU’s commitment to supporting Greece’s continued economic recovery and transformation.

Impact of US Tariffs on Greece

One significant recent challenge for Greece has been the implementation of new US tariffs. In early April 2025, the Trump administration imposed a 20% duty on European Union imports, including Greece's imports.

Olives, cement, aluminum, feta cheese, olive oil, and canned peaches are among the Greek products mainly affected.

Greece’s Minister of National Economy, Kyriakos Pierrakakis, condemned these tariffs as “a historic shift towards protectionism and a sharp change in the way the global economic system has operated for decades.”

While Greek economists argue that the impact will be limited as Greece is not heavily dependent on exports to the US, the tariffs will make Greek products more expensive for American consumers, potentially reducing their competitiveness in the US market.

Challenges: Cost of Living and Income Distribution

Despite the favorable macroeconomic indicators, it’s essential to acknowledge that the benefits of economic growth have not been equally distributed among all Greeks.

Rising domestic prices have undermined household real disposable income, which increased by only 1.0% in 2022 and 2.5% in 2023.

The Greek government has taken steps to address price increases, including imposing fines on multinational companies for unfair, excessive profit margins.

In late 2024, the government imposed €1 million fines on Procter & Gamble Greece Limited and Elais Unilever Hellas SA amid public anger over rising prices for essential goods.

Future Outlook

Greece's short to medium-term outlook remains positive, with growth expected to outpace the eurozone average through 2026. However, long-term projections suggest this growth will eventually moderate.

The IMF forecasts Greece’s growth rate falling to 1.3% by the end of the decade, close to its potential rate of 1%.

Several factors will influence Greece’s economic trajectory

Continued implementation of structural reforms to bolster public investment and enhance productivity

Protection of non-pension social spending such as healthcare and education to promote inclusive growth

Management of demographic challenges that could act as headwinds to long-term growth

Adaptation to global trade tensions and potential protectionist policies

Conclusion

Based on current economic indicators and projections, Greece is not facing economic turmoil or imminent bankruptcy, as suggested. On the contrary, the country shows promising growth prospects, decreasing debt levels, and rising wages.

While challenges remain—including the impact of US tariffs, the need to ensure economic benefits reach all citizens, and long-term demographic concerns—Greece appears well-positioned to continue its economic recovery and growth, supported by EU funding and ongoing reforms.

The narrative of Greece’s economy has shifted significantly since the debt crisis years, with the country now serving as a relatively bright spot in a European economy facing broader challenges.

As Greece continues implementing reforms and investments under its recovery plan, its economic resilience will likely continue through 2025 and beyond.