Wood expresses a highly positive outlook on Greece’s debt trajectory, describing the government’s estimates as conservative, and expects debt to approach 100% of GDP by 2030 thanks to effective fiscal management and strict fiscal discipline. This trajectory further strengthens prospects for upgrades to Greece’s credit rating.
Despite a slowdown in economic activity in the first half of 2025, Greece remains on a strong growth path: 2% this year and 2.5% in 2026. Investment momentum is supported by the absorption of recovery funds and improvements in productive capacity.
New Fiscal Relaxation Package
The firm notes that the government plans a moderate new package for 2026, aiming to support households, young people, and pensioners while updating the wage scale for the armed forces, police, fire, and coast guard. The package is valued at:
- €1.76 billion (0.7% of GDP) for 2026
- €2.5 billion (0.9% of GDP) for 2027
It is expected to benefit around 4 million taxpayers, including income tax relief for those under 25, given the low participation of this demographic in the labor force (22.7% in 2024 vs. EU average of 40.5%).
Tax Revenue and Fiscal Outperformance
Measures to improve tax compliance are yielding results:
- Corporate income tax: +1 percentage point to 3% of GDP
- Personal income tax: +0.6 points to 6.4%
- VAT: +0.7 points to 4.2%
Tourism revenues remain at 9.2% of GDP, below pre-pandemic levels (9.9%). Wood notes that resource allocation is not optimal, constraining household and business incomes and contributing to underlying inflation pressures.
Debt Reduction and Cash Reserves
Greek debt shows a strong downward trend:
- From 154.1% of GDP in 2024
- To 144.2% in 2025, 134.5% in 2026, and 101.3% in 2030, compared to the government’s projection of 120% of GDP.
Cash reserves remain high: €42.6 billion (17.5% of GDP), versus €15.3 billion (6.2% of GDP) in gross financing needs, providing fiscal security and the possibility of early repayment of GLF loans.
Labor Market and Wage Developments
The minimum wage rose by 6% in 2025 (from €830 to €880) with a planned further increase to €950 in 2027, boosting purchasing power without overly affecting productivity.
Wood’s Conclusion
Wood expects Greece to maintain primary surpluses above 2% of GDP, with a balanced fiscal path and gradual debt reduction, supporting credit rating upgrades and creating room for careful fiscal relaxation and targeted tax reforms.
Source: pagenews.gr