2024 is expected to be a transitional year for the Eurozone economy, with inflation easing significantly and interest rate cuts a visible prospect after two years of consecutive increases at multi-decade high levels.

The European Central Bank’s cut in inflation and interest rates will support incomes and consumption, with unemployment expected to remain low, but this will be done gradually and probably from the second half of the new year.

Therefore, overall expectations for 2024 are limited, with the European Central Bank predicting in December only a slightly higher growth rate in the Eurozone than in 2023 (0.8% versus 0.6%). According to the European Commission’s forecast, made in November, growth will reach 1.2% next year.

The subdued economic activity in the Eurozone is expected to be a limiting factor for Greek exports, but overall the Greek economy is expected to outperform in 2024, just as in 2023. The Commission predicts that its GDP will increase by 2.3%, while with the state budget the bar goes even higher, at 2.9%.

For the passing year, the growth of the Greek GDP is estimated at 2.4% by the Commissionthanks mainly to investments and record revenues from tourism, with the former expected to lead growth again this year.

For inflation, based on Eurostat’s harmonized index of consumer prices, the government budget is projected to fall from 4.1% at average levels this year to 2.6% in 2024, about as much as the ECB forecasts for the Eurozone as a whole (2.7%) .

Determinant to reduce inflation will be the de-escalation of food prices, which continue to grow at high rates this year (the annual growth rate in November was 6.8% for the Eurozone as a whole and 8.8% for Greece). The ECB estimates that food inflation in the Eurozone will fall sharply to 2.6% in the last quarter of 2024, due to falling international prices and energy costs.

Energy prices, which have fallen significantly this year from levels that spiked after Russia’s invasion of Ukraine in February 2022, helping to dampen inflation, are expected to stabilize. Therefore, they are not expected to contribute further to reducing inflation in 2024.

The uncertainty about energy prices however, it remains high as Israel’s ongoing war against Hamas has fueled a wider tension in the Middle East region, culminating in attacks by Yemen’s Iran-backed Houthis against ships crossing the Red Sea .

These attacks have led many major shipping companies that transport oil from the Persian Gulf to Europe to follow another route for their ships, through South Africa, which takes several days longer and of course at a much higher cost. The tension has sent Brent oil prices higher in recent weeks.

The international naval force, which was formed with the participation of several countries, including Greece, to ensure the unimpeded passage of ships through the Red Sea, has taken action in the area and it remains to be seen whether the shipping companies will decide to use this route again.