The International Monetary Fund (IMF) has lowered its forecast for Greece’s economic growth this year to 2%, down from 2.3% earlier in 2024. In its autumn economic outlook, the Fund maintains a medium-term growth projection of 2% in 2026, reflecting expectations of moderate but steady expansion.
Inflation is projected to edge higher to 3.1% in 2024, before easing to 2.5% by 2026, while Greece’s current account deficit is expected to remain in negative territory—-5.8% of GDP in 2025 and -5.3% in 2026.
Unemployment is forecast to continue its gradual decline, reaching 8.4% in 2026, signaling an improving labor market despite tighter growth prospects.
Debt remains a defining constraint
While the IMF acknowledges that Greece has firmly exited its bailout programs, it stresses that the country remains one of Europe’s most indebted economies—a key factor that still shapes credit ratings and market confidence.
Greece is grouped among the IMF’s “European debtors,” alongside Cyprus, Ireland, Portugal, and Spain—countries that have rebounded from financial crises yet still carry high debt loads. The Fund notes that maintaining fiscal discipline and reform continuity remains essential to safeguard credibility and prevent vulnerabilities from resurfacing.
April Review: Strong recovery, enduring reforms needed
The IMF’s April 2024 Article IV review had painted a more optimistic near-term picture, highlighting robust growth, strong investment, and a resilient labor market. The Fund described Greece’s short-term outlook as “favorable,” crediting the country’s post-crisis transformation and effective policy management.
Back in April, the IMF projected 2.1% GDP growth for 2025, driven primarily by investment projects funded through the EU’s Recovery and Resilience Facility (NextGenerationEU). Rising employment and household incomes were also expected to support private consumption and sustain domestic demand.
However, the Fund warned that as EU recovery funding gradually tapers off, Greece will need to rely more on structural reforms and private investment to maintain momentum. It cautioned that “continued fiscal vigilance” and ambitious policy reforms are critical for ensuring long-term stability and sustainable growth.
Inflation pressures and external risks
The April report also pointed to persistent core inflation, particularly in services, fueled by rising wages and strong domestic demand. The IMF identified external risks such as slower eurozone growth, geopolitical tensions, and global policy uncertainty, all of which could dampen Greece’s medium-term prospects.
The Fund urged the government to maintain policy flexibility and to press ahead with structural reforms that enhance competitiveness, productivity, and labor market efficiency. It warned that faster wage growth, if not matched by productivity gains, could prolong inflationary pressures.
Banking system strengthened, but monitoring needed
The IMF’s spring review praised the resilience of Greece’s banking system, noting a sharp decline in non-performing loans (NPLs) to around 3%, alongside strong profitability and capital adequacy. Liquidity risks have also receded, with buffers well above supervisory thresholds and EU averages.
Nonetheless, the Fund highlighted remaining pockets of vulnerability stemming from rapid credit expansion and exposure to real estate. It welcomed the activation of the countercyclical capital buffer (CCyB) and borrower-based housing measures, urging regulators to continue monitoring potential financial risks as credit conditions evolve.
Fiscal and structural reforms at the core of stability
The IMF commended Greece’s fiscal consolidation, supported by stronger revenues and reforms to combat tax evasion. It recommended maintaining primary surpluses above 2% of GDP over the medium term to reinforce debt sustainability.
The Fund also called for prioritizing public investment in green and digital transitions, improving the efficiency of social spending, and containing public sector wage and pension growth. It urged continued efforts to boost labor force participation, especially among women, and to reduce regulatory barriers that hinder entrepreneurship and competition.
Judicial reforms were also deemed vital for enhancing investor confidence and improving the business environment. The IMF further encouraged Greece to stay on course with its green and digital transformation, viewing them as key pillars for future competitiveness.
A cautious but constructive outlook
Taken together, the IMF’s autumn update and April review outline a consistent message: Greece’s recovery is resilient but still vulnerable.
Yet, the IMF emphasizes that sustained reform, disciplined fiscal management, and structural modernization remain essential for Greece to secure durable, inclusive, and long-term growth.
