The European Commission revised its forecasts for the Greek economy downwards on Monday, envisaging a GDP growth of 3.5 percent in 2022 and 3.1 percent in 2023 (from 4.9 percent and 3.5 percent respectively in its winter forecasts made in February).
In a report on Greece, the Commission said that following a rapid recovery from the pandemic and a very promising start in the first months of the year, the Russian war of aggression against Ukraine has blurred the outlook for Greece.
Economic growth is expected to slow but remain stable, mainly due to the full recovery of tourism. It noted that high inflation was expected to burden households’ real available income but government support measures were expected to partly compensate for this burden. The European Commission expects Greece to present a primary surplus in 2023.
The Commission report said that turmoil in global energy markets was expected to increase domestic inflationary pressure and to burden households’ real available income, adding that increased risk aversion along with supply bottlenecks could delay the start of new investment plans. However, the Greek economy was expected to benefit from the implementation of projects funded by the Recovery and Resilience Fund.
Exports were likely to continue growing although at a slower pace compared with previous estimates because of an expected economic slowdown in the EU and the global economy.
Real GDP is projected to grow by 3.5 percent in 2022 and by 3.1 percent in 2023, supported by a gradual recovery of real available income and an expected return of tourism to pre-pandemic levels.
The Greek economy will continue to create new jobs in 2022 despite a slowdown of economic activity, the Commission said, adding that a decision to raise the minimum wage by 7.5 percent in May, after a 2 percent increase in January could raise nominal wages in the second half of 2022 given the fact that almost one third of workers were paid with a minimum wage.
Commission says Greek inflation to reach 6.3 percent in 2022
The Greek inflation rate is expected to reach 6.3 percent in 2022 and fall to 1.9 percent in 2023, the Commission said.
Official data last week showed Greece’s annual consumer inflation jumped to its highest level in 28 years in April at 10.2 percent on the back of surging costs for energy, housing, transportation, and foods.
The general government deficit was 7.4 percent of GDP in 2021, reflecting increased pandemic relief support measures, but is expected to fall to 4.3 percent of GDP in 2022 and to 1 percent of GDP in 2023. This will allow the government to present a primary surplus of 1.3 percent of GDP.
The Greek public debt fell to 193 percent of GDP in 2021 and is expected to fall to 186 percent of GDP in 2022 while it is expected to decrease to around 180 percent of GDP in 2023.
The European Commission stressed that despite the better than expected result in 2021, fiscal risks remain significant.