Commission Sets Growth for Greece at 3.5%

Covid-19, the Russia-Ukraine war, and the energy crisis are expected to impact Greece’s recovery efforts, the European Commission said this week in its Spring 2022 Economic Forecast projecting overall, real GDP to grow by 3.5 percent in 2022 and to remain high at 3.1 percent in 2023 driven by a full tourism comeback.

At the same time, high inflation is expected to weigh on households’ real disposable income, but the fall is being partly cushioned by government support measures, it said.

The Commission’s current estimate has been revised downward from its previous 4.9 percent outlook in February and 5.2 percent in November 2021.

At the same time, headline inflation is projected to reach 6.3 percent in 2022 and 1.9 percent in 2023.

“The turmoil on global energy markets is expected to increase domestic inflationary pressures and weigh on the real disposable income of households. However, government support measures, increases in the minimum wage, and the savings accumulated during the pandemic are expected to partially cushion the negative effects on private consumption,” said the report.

Analysts add however that heightened risk aversion and increased supply bottlenecks are expected to delay the launch of new investment projects. The Greek economy will none the less benefit from the deployment of resilience and recovery funding.

Greek Finance Minister Christos Staikouras. Photo source: @cstaikouras

Commenting on the news, Finance Minister Christos Staikouras said “the current European Commission forecasts confirm the remarkable resilience shown by the Greek economy during the energy crisis, which is in fact presenting a stable dynamic”.

Staikouras went on to add that the Commission also “acknowledges the effectiveness of the government’s economic policy”, adding that despite being faced with impending losses as a result of the energy crisis as is all of Europe, the rate of growth is projected to be higher that the EU average for both for 2022 and 2023.

Greece also appears to be a ‘champion’ in Europe in terms of investments for the three-year 2021-2023 period, with a double-digit increase in investments for 2022, said the minister.

According to the Commission report, despite prolonged uncertainty due to Covid, the Greek economy recovered quickly in 2021, offsetting almost entirely the sharp economic decline from 2020. 

Source: European Commission

Greece’s real GDP grew by 8.3 percent in 2021, reflecting the better-than-expected tourism season, while private consumption almost fully recovered. 

“Growth was also driven by a notable boost in private investment, while goods exports continued growing, as the country benefited from the recovery in the EU and in other trading partners,” it said.

Job creation also showed strong growth in the second half of 2021 on the back of employment gains in agriculture and manufacturing. It is expected to continue also in 2022, despite the overall slow-down in economic activity this year. The minimum wage was increased by 7.5 percent this month, following a modest 2 percent rise in January.