“We expect in the autumn that Greece will have regained the coveted investment level and will have limited the “multidimensional” inflation” notes the president of the Piraeus Chamber of Commerce and Industry, Vassilis Korkidis, in an article.

Mr. Korkidis states the following in detail:

According to the State Budget Office in the Parliament, the “inflation of greed” is now a serious concern for the Greek market, as well as for the rest of the countries, for the course of the Eurozone economy. Despite the consumer price index decelerating to 2.7% in Greece and 5.4% in the Eurozone, the major inflationary hotbeds of food and consumer goods remain active and warn that unless business margins are contained, tackling inflation will drag on over time with even more interest rate hikes on the part of the ECB. In the report on the course of the Greek economy, it is estimated that there will be a significant de-escalation of inflation in 2024 with a reduction of the rate by 50%, from 4.6% this year to 2.3% next year, however there is a risk from the core of the accuracy , which is food.

Despite the positive picture, economic challenges remain and are mainly linked to the evolution of inflation from demand and cost to greed or profiteering, with redistributive effects that improve the position of some powerful ones, worsening the position of some small and medium ones. Related IMF research finds that Eurozone inflation from early 2022 is driven by 45% higher business profits, 40% by import prices and just 25% by wage growth.

The phenomenon has been characterized as “greedflation” and poses new dilemmas in dealing with it. Effectiveness in dealing with inflation depends more on holding down business profits, replacing imports with domestic production, and much less on controlling wage increases. So without a reduction in profit margins, the return of inflation to the 2% level will require more time and higher interest rates, with corresponding negative consequences for broader economic activity.

Fiscal changes from the de-escalation of inflation will also be important, as the favorable effect on public debt as a percentage of GDP will be limited. During 2022, General Government debt increased marginally by around €3 billion in nominal terms from €353.5 billion to €356.3 billion, but fell by an impressive 23% as a percentage of GDP from 194.6% to 171, 3%.

This positive development came from the difference between the debt growth rate and the nominal growth rate, but it is unlikely to be repeated this year to the same extent. It is noted, however, that despite the slowdown in the growth rate and the reduction in inflation, nominal growth is expected to remain higher than the interest rate. In addition, the de-escalation of average inflation will also slow down the growth of tax revenues, mainly VAT that follows price increases.

The Budget Office has prepared for this year and next year three scenarios regarding the course of the economy. However, these are variations of the basic scenario, which foresees the growth rate for the current and next year to be 2.2%, while inflation from 4.6% in 2023 to decrease to 2.3% in 2024. On the other hand On the other hand, inflation shows strong differentiation in individual categories of goods controlled by few and large companies worldwide.

Indicatively, in the food category the reduction is marginal, from 11.4% to 10.4%, in the clothing and footwear category it shows an increase from 5% to 12.2%. The maintenance of high inflation of some basic goods burdens the cost of living of the most vulnerable households, as much of the income is spent on food and shelter, reaching 60%. It is no coincidence that the preference gap is closing from branded to private label products.

The recovery of the investment grade will help to spread the lower cost of borrowing in the private sector, but also to eliminate the additional risk for investments, while the achievement of this target will improve the growth rate next year by at least half a point, from 2, 2% which is the forecast at 2.7%. This development in GDP translates into an additional 1.1 billion euros of national income and 400 million euros more revenue for the state.

Decisive is the early repayment over two years and in 2 installments of debt of 5.3 billion euros out of the total 34 billion euros of bailout loans. The ECB makes a positive assessment by at least one of the four eligible houses S&P, Moody’s, Fitch and DBRS a condition for the recovery of the investment grade. Upcoming ratings dates are from DBRS on September 8th, Moody’s on September 15th, S&P on October 20th and Fitch’s strict on December 1st. So we expect in the fall, that Greece will have regained the coveted investment grade and will have limited the “multidimensional” inflation.