Greg Kiss, Director of the Sovereign Analytical Team at Fitch Ratings, speaking exclusively to Bankingnews and Nikos Bartzeliotis, warns of the serious vulnerabilities that continue to threaten our country. The top analyst highlights the "paradox" of an economy that is growing in terms of GDP, while the real purchasing power and standard of living of citizens remain among the lowest in the European Union, having moved in the opposite direction over the last twenty years.
Greg Kiss points to the impending slowdown in growth, the stagnation of investments compared to the rest of the European South, as well as the fact that the high external deficit leaves Greece fully exposed to a new shock. Finally, against the backdrop of the heavy burden of debt and the gradual depletion of Recovery and Resilience Facility funds, he clarifies that true convergence with Europe is not a sprint, but an arduous marathon that will require decades.
How much is Greece expected to grow in the next few years, a country strongly dependent on tourism, given that it has to face significant macroeconomic challenges such as the geopolitical crises in Iran and Ukraine?
The Greek economy entered 2026 in a strong position. GDP growth was steady at slightly above 2% in 2023-2025, despite various geopolitical and trade shocks. We forecast somewhat lower growth in 2026, primarily due to the adverse impact from the Middle East conflict, but the economy will benefit from the last year of the Next Generation EU investment stimulus. Q1 GDP growth was 2%, driven primarily by domestic demand. Growth in Greece could remain resilient if the Middle-East conflict is easing, with the reopening of the Hormuz Strait around July. We forecast higher inflation, due to energy prices, to be temporary and peaking in mid-2026.
Αfter 2027 the Greek economy may enter a new phase. How will the Greek economy be affected by the fact that funds from the Recovery and Resilience Facility are gradually coming to an end?
Investments have increased significantly since the pandemic, boosted by stimulus from the EU’s Recovery and Resilience Facility. The investment ratio rose to almost 20% in 2025 from 15.6% in 2023, the highest level for two decades. However, investments are still lower than those of eurozone peers, including Portugal and Italy, where the investment-to-GDP ratio has stabilised above 20% in the past five years.
Greece is a “café economy” dependent on tourism and services. What should be the core components of a new productive model for Greece, and how long might such a transformation realistically take?
Over the medium term, we expect gradual income convergence with eurozone peers based on an estimated 2% potential growth rate. Domestic demand will remain the key growth driver, underpinned by gradual improvement in household balance sheets, steady employment growth and higher investments. Closing the gap with European peers will likely take decades and requires sustained investment and productivity improvements.
Do you see today a return of structural issues that were central during that time, such as wage stagnation, inequality, and weak domestic demand?
Domestic demand is expected to remain the key growth driver, supported by stronger household balance sheets, steady employment growth and rising investment. This suggests an improvement compared with the crisis period, although income convergence with the eurozone remains gradual.
Inflation in Greece appears to be heating up again. Certainly, one component of this increase is related to a rise in the demand curve, especially during the summer months, but we are mainly talking about a price increase driven by supply-side factors. How negatively do you think the fact that a new interest rate cycle is beginning will affect Greek businesses and households?
The global energy supply shock has led to higher inflation, weaker growth and increased fiscal pressures across Europe. However, Greece benefits from being a member of the eurozone, which provides an important shield against the amplification of external shocks. The credibility of the European Central Bank’s monetary policy should help mitigate second-round inflation effects without excessive sacrifices in economic activity. Moreover, the Greek sovereign enjoys favourable financing conditions, long debt maturities and low borrowing costs, making the country more resilient to tighter financing conditions than many other eurozone members.
Do you see today a return of structural problems that were central during the crisis period in Greece, such as the external deficit and public debt?
At the same time, the high current account deficit means that Greece remains reliant on external financing, which constitutes a vulnerability in the event of a major global shock. Although recent fiscal performance has been strong and the government has demonstrated a credible commitment to fiscal prudence, Greece still carries a heavy legacy from the debt crisis.
How do you explain the paradox of an economy that continues to grow in GDP terms while real purchasing power and living standards remain among the lowest in the European Union, according to Eurostat?
Notwithstanding the recent strong economic and fiscal performance, Greece’s recovery remains weaker than that of many eurozone peers from a longer-term perspective. Real GDP is still more than 10% below its 2007 peak, despite steady growth since 2021.
Greece’s real income performance is similarly weak. While all countries that joined the EU since 2004 achieved significant income convergence with the European average, Greece moved in the opposite direction. In purchasing power standards, Greek per-capita GDP stood at just 63% of the EU average in 2024, compared with 93% in 2004. Closing this gap will likely take decades; it is a marathon rather than a sprint.
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