Greece forecasts 2.3% GDP growth in 2027 draft budget as debt drops below Italy

Fiscal projections and growth targets

Greece submitted its draft 2027 state budget to parliament on 5 October 2026, projecting accelerated economic expansion driven by rising investment and private consumption. The government forecasts real gross domestic product will increase by 2.3% in 2027, following a 2.0% expansion in 2026. Fixed investment is expected to grow by 7.9% next year, while private consumption is projected to rise by 1.5%. The fiscal plan outlines an overall general government budget surplus of 0.6% of GDP in 2026 and 0.3% in 2027. The primary surplus, which excludes debt servicing costs, is estimated at 3.6% of GDP in 2026 and 3.3% in 2027, supported by a seven-month primary surplus of €8.9 billion recorded earlier in the year.

Finance Minister Kyriakos Pierrakakis presented the draft figures following their formal submission.

Despite an adverse external environment, the Greek economy is expected to continue to record significantly stronger growth than the euro zone average for the seventh consecutive year.

Debt reduction and sovereign bond yields

The Greek government expects public debt to continue falling rapidly, dropping from 146.1% of GDP in 2025 to 136.8% in 2026 and reaching 128.8% in 2027. This trajectory reflects a cumulative decrease of 67 percentage points since 2020, aided partly by early repayments of emergency bailout loans. Government forecasts indicate that Greece's debt-to-GDP ratio will drop below that of Italy before the end of 2026. This fiscal turnaround has shifted borrowing costs across European sovereign bond markets. On 5 October 2026, the yield on Greece's 10-year government bond stood at 4.49%, trading below Italy's 4.66% and France's 4.90%.

Fiscal Council evaluation and spending rules

The Hellenic Fiscal Council formally endorsed the macroeconomic framework of the draft budget while noting divergences in economic assumptions. While the finance ministry anticipates 2.3% growth in 2027, the Council projects growth at 2.0% for 2027 and 1.9% for 2026. The independent body also flagged potential risks related to the 7.9% investment target, pointing to the conclusion of the Recovery Fund and recent interest rate increases by the European Central Bank. Headline inflation is projected to drop from 3.6% in 2026 to 2.4% in 2027, though elevated energy costs present ongoing risks. Net primary expenditure is budgeted to rise by 8.0% in 2026 against a recommended European ceiling of 3.6%, and by 3.6% in 2027 against a 3.1% ceiling, utilizing European flexibility clauses for defence and energy security.

Household pressures and support package

Despite headline economic gains, domestic households continue to face economic strain from elevated living costs. Greece's real household purchasing power remains among the lowest in the European Union, with average monthly wages of €1500 remaining level with 2009 figures. Approximately 1.5 million people, representing nearly a quarter of the adult population, face difficulties servicing outstanding loan debts. In response, the 2027 budget allocates €2.2 billion in tax relief and direct subsidies targeted at low-income families and pensioners. These measures aim to offset high residential energy bills and rising accommodation expenses without breaching primary surplus targets.