Two good news about the course of the European economy arrive in the last days in Brussels and Frankfurt.

The first concerns the growth rate of the Eurozone in the second quarter of this year which, according to the first indications, shows clear acceleration trends compared to the first quarter (0.3%). The second concerns the course of inflation which, despite the fact that it remained stagnant in April at 2.4%, is nevertheless estimated to remain on a downward trajectory, in accordance with the objectives set by the ECB. This is a development that strengthens the prospect of a reduction in interest rates not only in June, but possibly also in July, if this trend is certainly confirmed in the next period.

Given these, the eurozone appears to be overcoming the “artificial recession” phase it had fallen into in the previous two quarters. And even in conditions of declining inflation, which paves the way for a reduction in interest rates in the coming months, with all that this implies for the strengthening of disposable income, consumption and investments.

Greek development

This positive environment ensures that the growth of the Greek economy will remain strong based on the forecasts of the Stability Program this year and in the coming years, point out economic agents with knowledge of the processes taking place in Brussels and Frankfurt.

In the Stability Program submitted to the Commission in the middle of the week, a growth rate in Greece of 2.5% this year and 2.6% in 2025 is predicted. These forecasts are based on the increase in private consumption on an annual basis by 1.6% in the two years 2024- 2025, mainly due to the increase in disposable income, from rising wages and falling inflation. Public consumption will move in the opposite direction, where its growth rate will be at low levels this year (0.7%) and at negative levels in 2025 (-2.5%). More important, however, compared to private consumption will be the contribution to the growth of private investments. According to the program, the gross formation of fixed capital is expected to increase by 9.1% in 2024 and by 14.4% in 2025 as a result of the absorption of the funds of the Recovery Fund, the reduction of interest rates and the more favorable environment it creates for the Greek economy the recovery of the investment grade.

Thus, investment as a percentage of GDP is estimated to increase to 17% in 2025, from 14% in 2023, thus narrowing the gap with the Eurozone average (22% in 2023).

The fiscal forecasts

As far as the primary budget surplus is concerned, the program predicts that it will be formed at 2.1% of GDP this year and 2025, respectively, while the general government deficit at 1.2% of GDP this year and 0.9% of GDP in 2025. Public debt is projected to narrow to 146.3% of GDP in 2025 from 152.7% of GDP this year and 161.9% of GDP last year.