Deutsche Bank estimates Greek growth will be well below the average set by most analysts, at just 1.2% in 2024, but will improve slightly to 2% in 2025. In addition, inflation is expected to fall to 2.2% next year, and the government will reduce the budget deficit to 1%.
Overall, however, Deutsche Bank is cautious about the eurozone economy as it believes it will be in a mild recession. Moreover, he believes that risks remain of a slowdown in economic recovery in the second half of 2024. Despite negative surprises in recent inflation figures, medium-term inflation risks are balanced.
Shallow recession
Deutsche Bank expects the recession to be shallow in the second half of 2023. The risk of a deeper recession is limited. While there is limited downside risk from the current recession, there is a risk that the growth recovery in H2 2024 will be slower than expected.
Three factors will be key to macroeconomic outcomes in 2024: monetary policy transmission, the labor market and competitiveness, explains Deutsche Bank. Data on economic conditions show the strong impact of policy tightening on the real economy. However, the German bank suggests that we are at or close to the peak of infection. “If we are wrong, growth could be even weaker,” it said.
Low competitiveness
The competitiveness of the Eurozone after the introduction of sanctions against Russia remains extremely low, despite the fall in energy prices. Uncertainty is high, risking slower growth, while rising populism, Germany’s budget crisis and the reintroduction of fiscal rules in 2024 could limit the speed of the transition.
PS GDP growth of 1.2% with inflation of about 7.6% means a drop in real GDP of 6.5%.
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