The Greek economy will grow at 2025 levels this year, as long as the crisis in the Middle East does not last longer than a month, Bank of Greece Governor Yannis Stournaras said on Thursday.

Speaking at Ceos Club, Greece’s central banker said the prospects of the Greek economy remained positive despite unfavorable external influences. He said a lot dependend on the duration of the Middle Eastern crisis. If this does not exceed a month, the growth rate of the real GDP in 2026 is expected in general to approach 2025 levels. At any rate, it would exceed the eurozone average and boost further convergence with the income levels of Greece’s European partners. Growth is expected to be mostly based on consumption, while investments will continue to contribute positively. Short-term, investments will be supported by the remaining Recovery and Resilience Funds (RRF) available.

Threats to growth are mostly vertical, however. In the short term, threats are related mostly to the growing geopolitical and trade instability – especially the conflict in the Middle East -, the higher-than-expected persistence of inflation, the possibility of natural disasters related to the climate crisis, the lower-than-expected absorption and utilization of RRF resources, and the slower-than-expected implementation of the needed reforms, which could impact the productivity of Greece’s economy negatively.

Stournaras added that a possible rise in inflation could have a positive short-term effect on fiscal results, due among others to the effect of ‘fiscal drag’ on tax revenues. Fiscal drag refers to the rise in tax revenues resulting from an increase in the nominal terms of the taxation base (eg income from work or profits) with other factors of taxation legislation (eg tax rates, discounts/exemptions) not being adjusted accordingly.