IOBE: At 5.2 the recovery of the Greek economy for 2022

IOBE revises down the estimate for recovery in 2022, to 5.2%, in constant prices, mainly due to a smaller expansion of exports (5.8%) and a decrease in public consumption (-1.1%), while it is expected increase in private consumption (7.7%), investments (12.1%) and imports (9.1%), as mentioned during today’s presentation of the IOBE’s quarterly report on the Greek Economy.

For 2023, IOBE expects softer annual growth of 1.4% in real terms, mainly due to a slowdown in the global economy, amid high inflation and uncertainty.

In terms of components, investment is expected to contribute the most to growth, with an annual increase of 8.5%, followed by a relatively resilient, if clearly softer, increase in private consumption of 0.8%.

In the external sector, little further deterioration in the already high current account deficit is expected, with exports and imports increasing annually in 2023 by 2.1% and 2.7% respectively.

He also estimates a milder decrease in the unemployment rate in the third quarter. of 2022 to 11.6% from 13.0% in the third quarter. of 2021.

The path of employment in 2022 was mainly determined by the very good performance of tourism, as well as the satisfactory path of exports, consumption and construction, despite high inflation and high energy costs.

Employment in 2023 is expected to be positively affected by the milder strengthening of investments, the further utilization of the Recovery Fund resources, the milder rise in consumption and exports, as well as by tourism.

These factors are expected to partially offset the – milder compared to 2022 – rise in inflation as well as the rise in borrowing costs.

The unemployment rate in 2022 is estimated to have fluctuated around 12.3%, while in 2023 it is expected to be around 11.5%.

The rate of change in the CPI of 9.6% in the whole of 2022 was the highest since 1994, after a modest increase of 1.2% a year earlier.

The strong rise is mainly due to the incremental direct impact of energy goods in the first nine months, and non-energy goods in the last quarter of 2022.

IOBE estimates that prices will remain on a milder upward trajectory this year, in the region of 4%, mainly due to the resilience of consumer demand.

During the presentation of the Report, the general director of IOBE, Professor Nikos Vettas, noted:

•During 2022, the Greek economy registered particularly significant growth dynamics, with a weakening tendency, following a cycle of fluctuations that began with the pandemic crisis.

•To evaluate the course of the economy in the short term, there are important positive factors. Overall, and starting from a lower base, our economy can run faster than the European average.

• The accumulated potential of the Greek economy is greater than that of most European ones. Unemployment, and in general the pool of unexploited labor, remains high, and the investment gap is even greater. Cashier’s desk

Recovery and the other inflow of European resources are of high importance and can mobilize wider investments. Extroverted firms, mainly manufacturing, have been placed in global value chains. Public debt, although very high, is currently less exposed to interest rate increases than other economies.

•The external environment is putting pressure on exports and investments due to the slowdown in the recovery in Europe, continued interest rate hikes and high uncertainty.

Financial decisions tend to be risk-averse, and therefore more introspective and short-term, just the opposite of what is desired.

• The significant deterioration in the trade balance and the high structural inflation highlight systematic weaknesses of the Greek economy.

The tendency for the trade deficit to widen as there is growth reflects relatively low competitiveness.

The upward trend in central prices of goods and services, as consumption recovers, suggests little scope for timely output response and low intensity of competition.

• It is critical to quickly achieve an assessment of the Greek economy at the investment level. This is a positive signal for the markets, improving expectations and leading to a broadening of the investment base and a reduction in funding costs.

• The stability of the fiscal balance is a prerequisite for the systematic development of the Greek economy.

•On the tax revenue side, in the current year there are four positive developments, from the growth of the economy itself, from the effect of the spread of electronic payments, from indirect taxes due to inflation and from income taxation as a progressive scale is applied.

•On the public expenditure side, support policies through subsidies, in addition to effects on fiscal and macroeconomic balances, have collateral effects on consumption and tax compliance.

• For Europe, handling the effects of the tripartite energy crisis, inflation and the Russian invasion will be crucial. How the rules for the new fiscal framework will be shaped is a bet for further fiscal integration.

•For our country, the parliamentary elections in a few months are important for the stability that will allow important investments, but also for the formation of a medium-term policy that will be able to combine two desirable characteristics: seriousness in a dangerous environment and the intention for reform sections.

RES-EMP

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