The European Commission revises downwards its forecast for the Greek economy

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The European Commission projects GDP growth of 3.5% in 2022 and 3.1% in 2023 (from 4.9% and 3.5%, respectively) Credit: Adam Jones, CC BY 2.0

The European Commission revised down its forecast for the Greek economy on Monday, envisaging GDP growth of 3.5% in 2022 and 3.1% in 2023 (compared to 4.9% and 3.5% respectively in its February winter forecast).

In a report on Greece, the Commission said that after a rapid recovery from the pandemic and a very promising start in the first months of the year, Russia’s war of aggression against Ukraine has clouded Greece’s prospects.

Economic growth is expected to slow but remain stable, mainly due to the full recovery of tourism. He noted that high inflation was expected to weigh on real household disposable income, but that government support measures should partly offset this burden. The European Commission expects Greece to show a primary surplus in 2023.

The Commission’s report says turmoil in global energy markets is expected to increase domestic inflationary pressure and weigh on households’ real disposable income, adding that heightened risk aversion as well as supply could delay the launch of new investment plans. However, the Greek economy was to benefit from the implementation of projects financed by the Recovery and Resilience Fund.

Exports are expected to continue to grow, although at a slower pace compared to previous estimates, due to an expected economic slowdown in the EU and the global economy.

Real GDP is expected to grow by 3.5% in 2022 and 3.1% in 2023, supported by a gradual recovery in real disposable 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 in economic activity, the Commission said, adding that a decision to increase the minimum wage by 7.5% in May, after a 2 % in January, could increase nominal wages in the second half of 2022 given that almost a third of workers were paid minimum wage.

Commission says Greek inflation will reach 6.3% in 2022

The Greek inflation rate is expected to reach 6.3% in 2022 and fall to 1.9% in 2023, the Commission said.

Official data last week showed annual consumer inflation in Greece hit a 28-year high in April at 10.2% due to soaring costs for energy, housing, transport and food.

The general government deficit was 7.4% of GDP in 2021, reflecting increased pandemic support measures, but is expected to fall to 4.3% of GDP in 2022 and 1% of GDP in 2023. This will allow the government to present a primary surplus. 1.3% of GDP.

Greek public debt fell to 193% of GDP in 2021 and is expected to fall to 186% of GDP in 2022, while it is expected to decline to around 180% of GDP in 2023.

The European Commission stressed that despite the better-than-expected outcome in 2021, fiscal risks remain significant.

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