Acceleration of the annual domestic recovery at 5.2% the fourth quarter of 2022, against growth of 4.4% in the previous quarter, boosted by investment (+36.6% year-on-year) and inflation-resistant household consumption (+4.2% year-on-year), estimates the IOVE.

The expansion of the annual growth rate of imports (+7.5%), combined with the decline of exports (-3.5%) for the second consecutive quarter acted as a brake on the rate of economic growth.

After the rewarming of the Greek economy during the 4th quarter of the previous year, the annual growth rate, according to IOBE, estimated at 6.1% for 2022. The strong growth rate of the previous year was primarily supported by private consumption (+7.9%) and investment (+21.8%). The negative developments for 2022 include the widening of the current account deficit (-9.7% as a percentage of GDP), with imports (+10.9%) increasing by almost twice as much as exports (+4.9 %).

For 2023, IOBE is waiting milder annual growth of 2.4% in real terms, mainly due to a slowdown in the global economy, in conditions of high inflation and uncertainty. In terms of components, investment is expected to contribute the most to growth, with an annual increase of 7.1% (fixed investment 10.0%), followed by a relatively resilient, though clearly softer, private consumption growth of 1.3% . In the external sector, little improvement is expected in the high current account deficit, with exports and imports increasing annually in 2023 by 3.2% and 2.6% respectively.

In 2022 as a whole, the unemployment rate fell by 2.3 percentage points, from 14.7% to 12.4%, the strongest since 2014. The hiring-leaving balance in the private sector was positive by 72.9 thousand people in 2022 but lower compared to the positive balance in 2021 (+133.1 thousand). The sectors with the largest increase in employment were Tourism (+52.2 thousand employed), Education (+32.3 thousand), Manufacturing (+22.9 thousand) and Wholesale-Retail trade (+ 19.9 thousand).

During the presentation of the report, the general director of IOBE, professor Nikos Vettas, write down:

– The Greek economy last year recorded very high growth potential, for the second year in a row, which erased the great recession that had preceded it due to the pandemic. For the current year, a significant slowdown in the growth rate of the economy is expected, as in the rest of Europe.

– Four factors supporting the current growth of the Greek economy:

First, the strong recovery in consumption, which was also strengthened by the household support measures, but mainly expresses an accumulated reaction after the restrictions of the pandemic.

Secondly, similar trends exist in other economies, mainly European, and as a result the strong dynamics of inbound tourism.

Thirdly, the activation of the Recovery and Resilience Fund and related European schemes, favors the economy both directly by channeling liquidity to its various sectors, with relatively favorable financing terms, and indirectly through reforms.

fourth, most of the Greek public debt is not affected by the rise of interest rates in the global environment, as it is more long-term and with fixed interest rates.

-Some of the factors that supported the growth of the domestic economy are running out or reversing, such as expansionary fiscal policy and the strong recovery in consumption after pandemic restrictions.

-Two critical trends for maintaining the dynamic growth of the economy in the medium term. The first concerns the gradual increase in goods exports in recent years, which covers a significant range of sectors and export destinations. The second trend concerns overall the degree to which the Greek economy is open, as defined by the sum of exports and imports as a percentage of the domestic product, and which is increasing.

-Important challenges for the economy come from the international environment. The monetary shift towards a tighter stance acquires lasting characteristics, while money becomes more expensive and selective. Recent turmoil in the international banking system, the energy crisis and the ongoing war in Ukraine keep uncertainty high.

– Challenges related to the structural characteristics of the Greek economy: Structural inflation remains highwhile the growth of the economy has been accompanied by a return to twin deficits, fiscal and external balance, the balancing of which is important to take place sooner rather than later.

– As the country is in a pre-election process, it is a condition for the consolidation of development dynamics to be followed by appropriate targeting in three key areas of economic policy: Firstly, it is necessary and urgent to return to primary surpluses in the next period, which will promote the robustness of fiscal, with the achievement of investment grade as soon as possible. Second, as the global context is no longer favorable for investment and exports, infrastructure and reform efforts must be strengthened, within and from the Recovery Fund, which will strengthen the country’s competitive position. Finally, the handling of inflation is of particular importance, on the one hand so that the relative competitive position of the country is not affected and on the other hand so that there is no continuing intense pressure on households. Priority is also given to measures for the systematic shift from the informal to the formal economy.