“Difficult to predict the speed of deflation and thus the effects on household purchasing power.”

This is noted in the quarterly magazine of the Center for Planning and Economic Research “Economic Developments” which is available online, starting today, on the KEPE website.

In the summary it is noted that Greek economy is still in growth trajectorydespite the unfavorable international circumstances, and shows relatively greater dynamics than the other Eurozone countries.

Also as mentioned, the average annual rate of change of the real Gross Domestic Product (GDP) of Greece is predicted at 5.3% for the year 2022 and at 2.2% for the year 2023.

This outlook results from the favorable development of several of the economic parameters included in the forecast, combined with the now obvious impact that the current economic and geopolitical developments have on the course of certain variables on many different fronts. While signs of a deceleration in energy prices seem to be dispelling some more pessimistic scenarios for the path of the European economy at the moment, geopolitical developments still pose serious risks.

At the same time, it is difficult to predict the speed at which inflation will de-escalate and, therefore, the relative effects on household purchasing power, production costs and interest rates, while, in the case of Greece, the potential effects of the electoral cycle are added to these uncertainties. .

On the contrary, a positive impact on the country’s development prospects may have a positive outcome regarding the recovery of investment grade for Greek government bonds, while the possibility of continuing the implementation of measures to support the economy could contribute to a more favorable development of the GDP scale compatible with meeting the fiscal goals, the implementation of projects and reforms of the Recovery and Resilience Fund and actions of the new NSRF 2021-2027, and the intensification of investments related to energy conservation and limiting energy dependence.

Inflation is decelerating

According to recent developments, inflation in both Greece and the Eurozone appears to be decelerating due to the decline in international energy prices. As is well known, the evolution of the course of international prices of energy products (natural gas and crude oil) affects domestic inflation, both directly, through the final prices of energy for consumers, and indirectly, through the cost of production of basic consumer goods . However, the de-escalation of inflation is contained due to the continued upward trend of prices in the other components of the CPI, and especially in the food sector, a consequence of the previous pass-through of increases in energy prices to the cost of production and transportation of products.

It is also noted that the budget is being executed better than originally planned, that the public debt is being reduced and that the green and digital transition is progressing.

Finally, it is noted that the planning of a medium-term strategic bonus policy must take into account the limited, mainly due to high over-indebtedness, fiscal space that Greece has in the present and in the future. “We must not forget that Greece has given the third highest in the European Union support from its Budget for the energy crisis in 2022, about 6% of GDP. The need to preserve the state’s resources will become much greater from 2024 onwards, when every year and for many years, strict fiscal targets will have to be met”, concludes KEPE.