The Hellenic Fiscal Council has endorsed the macroeconomic forecasts in the draft 2027 state budget, while warning that the economy will be tested by higher borrowing costs, rising energy prices and the transition to the post-Recovery Fund era.
Particular emphasis is being placed on investment, as the draft budget sees stronger growth than international organisations.
According to the Fiscal Council, the country is complying with the relevant fiscal rules, taking into account the flexibility provided for defence and energy security.
Growth: Diverging 2027 forecasts
For 2026, the Council forecasts growth of 1.9%, close to the 2.0% projected by the Ministry of National Economy and Finance.
For 2027, the draft budget’s forecast for 2.3% GDP growth is deemed acceptable, although the Fiscal Council sees growth at 2.0%. A greater challenge is posed by the estimated 7.9% increase in investment in 2027, which exceeds the forecasts of international organisations. The Council considers a smooth transition to new national and European financing instruments crucial, particularly following the completion of the Recovery Fund and the ECB’s recent interest-rate increase.
Inflation is projected to ease from 3.6% in 2026 to 2.4% in 2027. Rising energy costs, however, pose a risk of keeping inflationary pressures elevated.
Primary surpluses and faster debt reduction
The primary surplus is estimated at 3.6% of GDP in 2026, following an upward revision, and at 3.3% in 2027. The General Government balance is also expected to remain in surplus in both years.
The Fiscal Council considers the seven-month budget execution data, showing a primary surplus of €8.9 billion, to reinforce the assessment that the 2026 target is achievable.
Meanwhile, the public debt-to-GDP ratio is projected to decline from 146.1% in 2025 to 136.8% in 2026 and 128.8% in 2027.
Despite the decline, Greece’s debt remains the highest in the European Union. The Council therefore stresses the need for continued fiscal vigilance.
How spending overruns are being covered
Compliance with the European fiscal framework is also supported by the flexibility provided under the national escape clause for defence and energy security.
Following an increase in net expenditure below the permitted threshold in 2025, the increase in net primary expenditure is projected at:
- 8.0% in 2026, against a recommended ceiling of 3.6%.
- 3.6% in 2027, against a ceiling of 3.1%.
In the period 2024–2027, the increase reaches 14.9%, against a ceiling of 13.7%. The remaining balance in the control account therefore stands at 0.3% of GDP in 2026 and 0.5% in 2027.
Taking into account the relevant flexibility, the balance of the enhanced control account is reduced to almost zero. This forecast incorporates an increase in defence spending equivalent to around 0.4% of GDP in 2026 and 0.3% in 2027, as well as energy measures worth 0.2% of GDP in 2027.
According to the Fiscal Council, the national fiscal rule is fully complied with.
Energy prices, interest rates and election period are key risk areas
The Council identifies fiscal credibility, debt reduction and the improvement in Greece’s credit rating as important strengths supporting growth and measures to assist vulnerable groups, particularly in an environment of higher interest rates.
The international environment, however, remains highly uncertain. Geopolitical tensions in Ukraine and the Middle East, the renewed increase in energy prices in September and higher borrowing costs are putting pressure on economic activity, the cost of living and public finances.
On energy, the Fiscal Council considers a coordinated European response crucial. It warns that fragmented national interventions entail higher fiscal costs and risks distorting the single market.
The warning also applies domestically: any slowdown in structural reforms, particularly ahead of the election period, could limit productivity gains and undermine confidence in economic policy.
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