"The water is drinkable."
Translation:Το νερό πίνεται.
Yes you are right it does mean both. Both translation are correct. But when someone says that, it is more possible that he means that the water is drinkable. Or he could ask: Πίνεται το νερό?/ Το νερό πίνεται?= Is the water drinkable?. Also there is another alternative : Το νερό είναι πόσιμο. In this case it means only drinkable