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Greek Economy to Grow by 7% this Year, EBRD Report Says

Greek economy
The European Bank for Reconstruction and Development says that the Greek economy will grow by 7 percent in 2021. Credit: Public Domain

The Greek economy is expected to grow by 7 percent this year and by 3.9 percent in 2022, the European Bank for Reconstruction and Development (EBRD) said in its latest Regional Economic Prospects report, published on Thursday.

The forecast is higher than the International Monetary Fund’s which in October predicted a growth rate of 6.5 percent. The IMF’s report came a week after Greece’s own prediction and offered almost exactly the same figure.

Greek economy speeds up with infrastructure projects

More specifically, EBRD said the economic recovery will speed up as the country promoted significant infrastructure projects, but noted that significant downward risk still remained, related with the course of the coronavirus pandemic and its impact on tourism and other services.

The Greek economy recovered strongly after a 9.0 percent contraction in 2020. In the first quarter, the country’s GDP grew by 4.5 percent on a quarterly basis and by 3.4 percent in the second quarter.

EBRD said fiscal policy remained focused on measures to deal with the crisis, with the fiscal deficit likely to exceed 7 percent of GDP for a second year in a row. However, the implementation of a Recovery Fund is expected to contribute significantly in boosting economic growth.

EBRD has raised its forecast for its regions for 2021 to 5.5 percent. While this represents an upward revision of 1.3 percentage points over its June forecast following a strong performance in the first half-year, the Bank warned of serious threats ahead.

High commodity and energy prices, tight labor markets, supply chain disruption and currency depreciations in some EBRD economies have begun to push up inflation even before the latest spike in Covid-19 infection cases.

On average, inflation in the EBRD regions exceeded its end of 2019 levels by 3 percentage points in September 2021. In response, a number of central banks in the EBRD regions have raised policy interest rates.

In some EBRD economies tight labor markets added to inflationary pressures with a strong rebound in vacancies in lower-medium skilled occupations. In other economies, considerable slack in labor markets remains. Unemployment increased by 1.4 percentage points on average between February and August 2020, while labor force participation fell by half a percentage point on average.

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