Economic growth in Greece will exceed the average for EU in 2022, but inflation will remain high, according to the European Commission’s 2022 economic outlook report released Thursday.
It says Greece maintained its momentum in the first quarter of 2022, with real GDP up 2.3% qoq. Growth in consumer spending was supported by positive developments in the labor market, and investment rose markedly. Net exports fell due to a slowdown in the growth of Greece’s main trading partners, as well as continued disruptions in the global supply chain.
Growth in the first quarter surpassed previous estimates, but the full impact of higher inflation and the resulting contraction in real disposable income is expected to be felt later this year. In addition to continued high inflation, lower job creation momentum, especially due to weaker output growth in sectors subject to high production costs, will dampen household spending in the coming quarters.
Growth in 2022 is also projected to be supported by the momentum from RRP rollout. High-frequency indicators confirm expected good prospects for tourism in 2022 and remain in line with forecasts of a full return to pre-pandemic levels by 2023. Overall, real GDP is projected to grow by 4.0% in 2022 and slow to 2.4 % in 2023.
Going forward, increased uncertainty is expected to further dampen demand for new jobs and, combined with still high inflation, dampen growth in 2023. In addition, given the weaker growth outlook for the economy, as well as tighter credit conditions, private investment is expected to slow down despite the RRF’s momentum. Exports of goods will slow down compared to the previous forecast, given the less favorable external environment.
Consumer price inflation continues to rise, mainly due to rising world energy and food prices. The pass-through effect to the rest of the consumer basket is expected to keep inflation high throughout the forecast horizon, with headline inflation reaching 8.9% in 2022 and 3.5% in 2023.
Forecast risks have increased. On the other hand, they are linked to the tourism sector in light of the uncertain purchasing power of incoming tourists and increased geopolitical tensions in the region. Potentially more positive labor market dynamics could provide stronger-than-expected support for household income and thus private consumption in the future.
PS Despite all the clever phrases of financiers, one thing is clear: with GDP growth of 2.3% and inflation of 12%, real growth will be almost minus 10%. As well as the fact that the US dollar has already exceeded the euro. But we are on the “right side of history.”