The Bank of Greece published Governor Yannis Stournaras’ speech to the Annual General Meeting of Shareholders presenting the Annual Report 2025, framing the recent military escalation in the Middle East as a negative shock disrupting energy markets and global supply chains and worsening the balance of risks for growth and inflation. Against that backdrop, the report argues that Greece entered this period with stronger fundamentals, citing 2025 outperformance driven increasingly by investment, improved fiscal metrics and further strengthening in the banking sector. In 2025, the euro area grew by 1.4% while inflation fell to levels consistent with the European Central Bank’s medium-term target, with headline inflation at 2.1% and core inflation at 2.4%; the ECB cut key rates by a cumulative 200 basis points by June 2025 and has kept the key policy rate at 2% since July 2025. Greece recorded growth of 2.1% with an investment-to-GDP ratio at a 16-year high and productive investment (excluding construction) at its highest share of GDP in 30 years; headline and core inflation were 2.9% and 3.6%, and unemployment fell to 8.9%. The current account deficit narrowed to 5.7% of GDP, foreign direct investment reached EUR 12 billion, and Bank of Greece estimates put the 2025 primary surplus at 4.4% of GDP with public debt expected at 146% of GDP; bank deposits rose by EUR 10.4 billion to EUR 213 billion, lending rates declined, household credit expanded for the first time in many years, and banks’ capital, liquidity and asset quality improved with EU-wide stress tests cited as confirming resilience. For 2026, the Bank of Greece projects Greek growth slowing to 1.9% (euro area: 0.9%), unemployment falling to 8.2%, and headline inflation rising to 3.1% while core inflation eases to 3.0%; the primary surplus is projected at around 3.2% of GDP with a marginal general government budget surplus, and the persistent current account deficit is highlighted as the key vulnerability. The speech also sets out policy implications under heightened uncertainty, including a data-dependent ECB stance with the possibility of tighter policy if energy shocks spill over into persistent inflation, targeted and temporary fiscal support, and a domestic agenda focused on investment and RRF absorption, competitiveness reforms, faster justice and administrative processes, broader export capacity, and stronger financial intermediation alongside further EU integration such as completing the Banking Union and advancing a Savings and Investments Union.

Original source View in tracker