The European Commission has revised down its forecasts for the Greek economy, forecasting GDP growth of 3.5% in 2022 and 3.1% in 2023 from 4.9% and 3.5%, respectively, compared to its forecasts. taken in February last year.
On Monday, the European Commission published its spring report on economic growth in member countries. EU entitled “Economic Outlook for Spring 2022: Russian Invasion Tests EU Economic Resilience.”
In a report on Greece, the European Commission said that after a quick recovery from the pandemic and a very promising start in the first months of the year, Russia’s aggressive war against Ukraine clouded the prospects for Greece. Economic growth is expected to slow but remain robust, mainly due to the full recovery of tourism.
The authors of the report noted that high inflation is expected to burden households’ real disposable income, but government support measures are expected to partially offset this burden. The European Commission expects Greece to report a primary surplus in 2023.
The commission’s report said turmoil in global energy markets is expected to increase domestic inflationary pressures and weigh on households’ real disposable income, adding that heightened risk aversion, along with supply bottlenecks, could delay the launch of new investment plans. But the Greek economy was expected to benefit from the implementation of projects funded by the Recovery and Resilience Fund. Exports are likely to continue to grow, albeit at a slower pace compared to previous estimates, due to the expected economic downturn in the EU and the global economy.
Real GDP is projected 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 the decision to raise the minimum wage by 7.5% in May after a 2% increase in January could lead to an increase in nominal wages in the second half of 2022, with almost a third of workers earning the minimum wage.
Greece’s inflation rate is expected to reach 6.3% in 2022 and fall to 1.9% in 2023, the commission said. The general government deficit stood at 7.4% of GDP in 2021, reflecting increased support for pandemic relief. But it is expected to fall to 4.3% of GDP in 2022 and to 1% of GDP in 2023, allowing the government to post a primary surplus of 1.3% of GDP.
Greece’s public debt fell to 193% of GDP in 2021 and is expected to fall to 186% of GDP in 2022 and around 180% of GDP in 2023. The European Commission stressed that despite a better-than-expected performance in 2021, fiscal risks remain significant.