Greek economic growth was solid in the first half of 2022 and it is projected to continue in 2022, 2023 and 2024, surpassing the EU and the eurozone average growth rates, the European Commission said in its winter economic forecast report released on Monday.
More specifically, the Greek economy is projected to grow by 5.5% in 2022, 1.2% in 2023 and 2.2% in 2024, surpassing the 3.5%, 0.9% and 1.5%, respectively, growth forecast for the Eurozone and 3.5%, 0.8% and 1.6% in the EU.
The Commission’s forecasts were revised slightly down for 2022 compared with its previous forecasts in November (6%) and slightly up for 2023 and 2024 (1% and 2%, respectively).
Inflation hit Greek economic growth
Greece’s economy recorded solid growth in the first half of 2022, but rising inflation took its toll on growth in the second half of the year, the EU executive said in the report.
However, the Recovery and Resilience Facility (RRF) provided notable support to the economy and government measures cushioned the impact of energy prices on businesses’ input costs and households’ real disposable incomes.
Overall, real GDP growth is expected to have reached 5.5% in 2022.
Falling inflation is expected to gradually ease the burden on households’ real income and benefit private consumption. The timely and effective implementation of the Recovery and Resilience Plan (RRP) is projected to remain the main driver of investment growth, partly offsetting weakening corporate investment due to the tightening of financing conditions.
Exports and tourism to aid Greek economic growth
With the external environment slowly improving as of the second half of 2023, exports are set to pick up the pace in 2024. Receipts from international tourism are forecast to increase in 2023 and 2024. Overall, real GDP is forecast to grow by 1.2% in 2023 and to pick up to 2.2% in 2024.
Energy price inflation eased following its September 2022 peak and HICP inflation is set to further moderate over the forecast horizon, on the back of falling energy prices and associated negative base effects.
However, food price inflation is expected to prove more persistent, given the lagged pass-through of high energy costs on food production. After averaging 9.3% in 2022, headline inflation is forecast at 4.5% in 2023 and 2.4% in 2024.
The announced increase in the minimum wage, set to come into effect in April 2023, has not been factored into this forecast as the Greek authorities have yet to define its scope.
Greece’s growth outlook is subject to downside risks related to the potential impact of geopolitical tensions on international tourism. As regards risks to the inflation outlook, upside risks are related to the aforementioned increase in the minimum wage.