IMF: Greece met the shock of war with strengthened fiscal sustainability and financial stability

The IMF noted that strong investment activity and structural reforms under the Next Generation EU (Recovery and Resilience Facility) framework are supporting growth against the impact of the war, projecting economic growth at 1.8% in 2026.
Reforms aimed at tackling tax evasion have created fiscal space for the government to implement household income support measures, while simultaneously ensuring a rapid reduction in public debt.

IMF report
Greece met the shock from the war in the Middle East with strengthened fiscal sustainability and financial stability.
The right macroeconomic and financial policy mix would help preserve macro-financial stability and foster balanced and sustainable growth in the medium term.
Ambitious structural reforms, along with completing the EU Single Market, would support growth sustainably at a high level and reduce the persistent current account deficit.

The energy price shock from the Middle East war is a considerable headwind, but strong investment and structural reforms in the context of Next Generation EU (NGEU) are supporting growth. Recent reforms to reduce tax evasion have broadened the tax base and reduced informality, creating some space to support households’ disposable income while ensuring a rapid public debt reduction. The 2026 Financial Sector Assessment Program (FSAP)-the first since 2006-finds that systemic risks in the financial sector were low prior to the war and remain manageable.

GDP growth is projected to soften to 1.8 percent in 2026. While supported by higher public investment and household support measures, elevated energy prices and weaker external demand stemming from the war will weigh on private consumption and tourism. Over the medium term, growth is forecast to ease to 1 1/2 percent against the backdrop of the declining working age population with low labor force participation and sluggish productivity growth.

Risks are tilted downward, especially stemming from a protracted war, an escalation of geopolitical tensions, and trade fragmentation, while domestic risks include delays in the execution of NGEU-funded projects. Upside risks to inflation arise from further rises in commodity prices, wage growth outpacing labor productivity, and higher costs associated with climate shocks.