Bank of America (BofA) is striking an optimistic tone on the prospects of the eurozone periphery, despite the lingering impact of trade tariff shocks that have somewhat delayed the region’s growth momentum. Greece follows this positive trend according to the bank’s latest analysis.
Bank of America forecasts the eurozone’s peripheral economies will continue to outpace the broader bloc in 2025 and 2026. However, it warns that uneven post-2020 recoveries and differing growth structures pose ongoing risks. Added pressures from tariff uncertainty and rising bond yields further cloud the outlook.
Bank of America highlights fiscal policy as a key vulnerability, noting limited room for national governments to act independently. With pressures from post-pandemic shifts and evolving policy landscapes, careful fiscal management will be essential.
Despite the common pressures, regional economies on the eurozone’s periphery have largely outperformed the broader average since the pandemic.
Greece, in particular, is highlighted for the strength and consistency of its performance, which BofA attributes to three main factors that emerged in the pandemic era: a significant rebound in capital expenditure, a relatively muted transmission of European Central Bank monetary tightening, and a steadfast commitment to fiscal discipline and structural reforms.
These same factors—especially the investment recovery and reform momentum—are expected to continue driving Greece’s growth through 2025 and 2026.
At the same time, the bank acknowledges the limitations of Greece’s growth exposure. The country’s lower interest rate sensitivity means that the benefits from potential monetary easing will likely be more subdued compared to its eurozone peers.
Moreover, although Greece has lagged in bringing inflation down, increases in the minimum wage during 2023 and 2024 have already led to earlier-than-expected gains in real income.
The European Recovery and Resilience Facility (RRF) remains a critical element in the outlook. While all peripheral countries stand to benefit from its implementation, fiscal constraints limit how far national governments can push on their own. This places heightened importance on the efficient and timely deployment of EU funds to address long-term structural issues.
Despite relative strength in the periphery, BofA has lowered growth forecasts for several eurozone countries amid rising trade policy uncertainty and tighter tariffs.
Projections for Italy, Greece, and Portugal were each cut by 40 basis points for 2025–26, while Ireland faced a sharper 70-point downgrade. Spain is expected to hold up better, helped by strong carry-over momentum from 2025.
BofA’s updated GDP growth forecasts for 2025 and 2026 are as follows: Italy at 0.4% and 0.7%, Spain at 2.4% and 1.5%, Portugal at 2.2% and 1.6%, Greece at 1.7% for both years, and Ireland at 3.5% and 1.9%. The eurozone as a whole is expected to grow by 0.8% in 2025 and 1.0% in 2026.
VIA: https://www.ot.gr
