It is noted that the forecasts announced by the Commission for Greece in March, as part of the spring estimates, spoke of growth of 3.5% this year and 3.1%.
By Chrysostomos Tsoufis
Higher growth this year but lower this year and a new increase in inflation is the conclusion of its summer estimates Commission for Greece.
The Commission raises its forecast 4% growth this year from 3.5% in the spring estimates, however, it drops the rate to 2.4% for 2023 from the 3.1% it estimated in the Spring. The development for 2022 will be supported by the funds of the Recovery Fund as well as the dynamic course of tourism which is expected to reach the pre-pandemic levels by 2023.
But the 2023 the increased uncertainty will reduce the demand for new jobs and the still high inflation will weaken the growth rate, which will however remain much higher than that of the Eurozone. In addition, a contraction is expected both in investments mainly due to the stricter lending conditions and in exports due to the negative international environment.
At the same time, the Commission is revising its estimates for him inflation to 8.9% this year, 1.3 points above the Eurozone average, and to 3.5% for 2023. In the spring, he thought inflation would be 6.3% this year and just 1.9% in 2023 Inflation is accelerating according to the Commission mainly due to the explosion of international energy and food prices.
Her estimates Commission may prove optimistic as there is uncertainty about tourism in light of the uncertain spending power of inbound tourists and heightened geopolitical tensions in the region. On the contrary, the employment sector could move more dynamically and provide a greater than estimated boost to household income and thus keep private consumption high in the future as well.
Specifically, in its report on Greece, the Commission states the following:
Economic growth in Greece maintained its momentum in the first quarter of 2022, with real GDP growing by 2.3% quarter-on-quarter. Stable consumer spending was supported by positive developments in the labor market and investment increased significantly. Net exports shrank due to a slowdown in Greece’s main trading partners as well as ongoing global supply chain disruptions.
Growth in the first quarter beat earlier estimates, but the full impact of higher inflation and the resulting squeeze on real disposable income is expected to take effect later in the year. In addition to maintaining high inflation, weakening momentum in job creation, particularly due to weaker output growth in sectors affected by high input costs, is expected to act as a drag on household spending in the coming quarters.
Growth in 2022 is also forecast to be supported by the boost from the recovery and resilience plan (RRP) development. The expected stable outlook for tourism in 2022 and forecasts for a full return to pre-pandemic levels by 2023 are confirmed. 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 reduce the demand for new jobs and, combined with the still high rate of inflation, is expected to weaken growth in 2023. In addition, weakened forecasts for the growth of the economy are expected to slow down private investment. , despite the boost from the Recovery and Resilience Facility (RRF). Exports of goods are expected to slow compared to the previous forecast, given the less supportive external environment.
Consumer price inflation continues to rise, mainly due to the boom in international energy and food prices. The pass-through to the rest of the consumption basket is expected to keep inflation high for the entire forecast horizon (2022 and 2023). Headline inflation is forecast to reach 8.9% in 2022 and 3.5% in 2023.
Risks to forecasts have increased. On the other hand, they are linked to the tourism sector in light of the uncertain spending power of inbound tourists and heightened geopolitical tensions in the region. On the upside, potentially more positive labor market dynamics could provide stronger than hypothesized support to household income and thus private consumption going forward.
RES-EMP
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