The Bank of Greece (BoG) said on Monday that economic growth will reach 4.2 percent this year, as it had also forecast in its previous report, with growth being particularly strong in the latter half of 2021.
The forecast is higher than the 3.6 percent that had been estimated by the International Monetary Fund (IMF).
The BoG’s monetary policy report for 2020-21 notes that the recovery of economic activity has already begun, but warned that “significant challenges” remain for the economy.
“The recovery is expected to gain momentum in the second half, driven by pent-up domestic demand, the launch of projects under the National Recovery Plan and an expected increase in tourism receipts relative to 2020,” the central bank said.
Growth in Greece to increase to 5.3 percent in 2022
It projected the country’s economic growth to pick up next year to 5.3 percent but then ease back to 3.9 percent in 2023.
“The increase in savings during the pandemic, either precautionary or forced due to the containment measures, and the release of pent-up demand are expected to support an increase in private consumption expenditure this year,” it said.
The revised forecast of the BoG for the primary balance of the general government budget points to a deficit of about 7.1% of gross domestic product.
However, this doesn’t take into account a range of other fiscal factors including interest on the debt, the cost of running cities and towns, state enterprises, social security and some military costs.
The report notes that the challenges facing the Greek economy include the re-emergence of the twin deficit and the high public and private debt, as well as the end of the European Central Bank’s PEPP bond-buying program.
Use of EU resources must be rapid
It stresses that the usage of the Next Generation EU resources needs to be rapid and efficient, while warning about the risks of sudden withdrawal of support measures and excessive fiscal easing.
The report highlights that attaining high and sustainable growth rates – to support the reduction of the public debt-to-GDP ratio – requires the quick and effective utilization of European grants and loans in order to give the economy a growth boost by accelerating public and private investments.
The BoG estimates that the “Greece 2.0” blueprint can add 6.9 percent to GDP per the baseline scenario and 8.5 percent per the optimistic version.
The downside risks for the economy are in the short term related to the course of the pandemic and the spread of variants, despite the progress of the inoculation process and the return to a path of growth, the report says.
Greece’s financial realm managed to weather the economic turmoil brought about by the pandemic and the lockdowns that were imposed in the country, despite concerns over its strength, it noted.
Click on this link for the full report by the Bank of Greece.