The shock in energy rates occasioned by the Middle East war has made the Bank of Greece change its estimates on the Greek economy, whereby they now estimate the growth of the economy to 1.9 per cent and an increase in the inflation rate to 3.1 per cent.
According to the central bank, as per the central bank “note on the Greek Economy,” the new projections are pegged on the key assumptions contained in the ECB March 2026 Macroeconomic Projections Exercise, which suggests a massive rise in the prices of energy commodities as a result of the war in the Middle East. They apply the assumption that oil and gas prices will reach the highest point of about 90/barrel and 50/MWh, respectively, in the second quarter of 2026, and then reduce in subsequent quarters.
As a result, the bank has revised its projections of the Greek economy to 1.9% growth in 2026 (compared to the 2.1% growth in 2026 that it had initially forecasted), and to 2% growth in the years between 2027 and 2028, but without any further fiscal and monetary policy measures, as a consequence of the war, although overtaking the expansion of the euro area. The growth, as it is claimed, will be primarily driven by the consumption and investment of the people and marginally negative by the net exports.
Inflation is also expected to be high, and it is projected to be 3.1% in 2026 as compared to 2.1 in the previous forecast, due to the increasing costs of energy and unprocessed foods and the fact that inflation has been maintained in services. Inflation will eventually stabilise (to 2.4% in 2027 and 2.3% in 2028) over the forecast period due to the prospects of a smoothing of the prices of energy commodities.
As the bank augments, risks of the enlarged forecasts are mostly negative and are more concerned with an additional increase in the war and consequent increment in the degree of economic uncertainty, further intensification of trade protectionism across nations, further increase in inflation and unpredictable weather patterns.
Thursday saw the ECB issue the new projections of its professionals, who, unusually, include data until March 11, a later date than usual to include data, but they make no pronounced assumptions about the duration and intensity of the war.
