UBS: Three Key Drivers for the Greek Economy in 2025–2026

In its latest economic update on Greece, Swiss investment bank UBS outlines a cautiously optimistic outlook for the Greek economy over the next two years. The bank forecasts:

• GDP growth of 2.3% in 2025 (revised down from 2.6%)
• A slight acceleration to 2.4% in 2026 (up from a previous forecast of 2.3%)

The downgrade for 2025 reflects the weak start to the year, with zero quarterly growth in Q1, as well as expected headwinds from increased U.S. tariffs on EU exports.

Despite the adjustment, UBS remains more optimistic than the market consensus, pointing to three short-term downside risks and three fundamental growth pillars.

Short-Term Risks: What Could Go Wrong

UBS highlights the following external and domestic vulnerabilities that could weigh on growth:

1. Deterioration in the global trade environment, especially due to U.S.–EU tariff escalation
2. Climate-related disasters such as wildfires and floods, which affect key sectors like tourism and agriculture
3. Slower-than-expected absorption of EU Recovery and Resilience Facility (RRF) funds, especially the loan component

Three Growth Pillars: Consumption, Investment, Tourism

UBS identifies three main drivers underpinning Greece’s medium-term economic performance:

1. Private Consumption

• Projected to grow at a steady annual rate of 1.5% in 2025–26
• Unemployment fell to 7.9% in May — a 17-year low
• Over 340,000 new jobs created in H1 2025, most of them permanent
• Expected €2 billion in tax reliefs (~0.8% of GDP), to be announced at the Thessaloniki International Fair in September, targeted at middle-income households

2. Investment and EU Recovery Funds

• Greece has already absorbed €21.3 billion from the €36 billion RRF envelope (~9% of GDP)
• Additional €3.9 billion in new disbursement requests have been submitted
• UBS estimates 70% of the total funds will be absorbed by the end of 2025
• Public and private investment is expected to grow by 6.5% to 8% over the 2025–26 period
• Watchpoint: While €16.1 billion in RRF loans have been contracted, only half has been disbursed

3. Tourism

• UBS projects a 5% increase in tourism revenues in 2025
• Strong performance in air traffic (+5.2% YoY in H1 2025)
• Tourism remains a key GDP driver, bolstered by seasonal extension and premium travel offerings

Banking Sector Outlook: Piraeus Still the Top Pick

UBS maintains a “Buy” recommendation for all four major Greek banks, with Piraeus Bank as its top pick.

UBS cites strong capital buffers, profitability, and deleveraging progress as key strengths supporting bank-led credit expansion.

Conclusion: Stability With Caution

Despite headwinds, UBS remains confident in Greece’s growth trajectory, citing:

• Robust labor market
• EU funding inflows
• Resilient tourism industry

However, execution risk in fund absorption, geopolitical tensions, and climate vulnerabilities remain factors to watch in the months ahead.

Source: pagenews.gr