The pandemic and rising prices are hurting the Greek economy

The Greek economy is under the threat of a double crisis. On the one hand, the Omicron variant has put new data on the table, with the strictest measures at the gates, while at the same time the price increases in the Greek market create an “explosive” climate in households and small and medium enterprises.

Scientists’ forecasts even speak of 20,000 cases a day in the coming period and depending on the evolution of the pandemic, it is something that is sounding the alarm for the government’s financial staff.

According to information, in the coming days, it will be possible to form a better picture of the new needs that will arise at the financial level and in particular if it will be necessary and to what extent to take new financial support measures, related to restrictive measures. The government has made it clear – so far – that it will not proceed with a lockdown, however any restrictions imposed will have a financial impact. It is worth noting that a “hard” lockdown, during the last period, cost about 2.5-3 billion euros per month.

The 2022 budget includes a special Covid reserve of € 1 billion, an amount which is expected to soon prove insufficient to meet the needs, which will lead to a shift in attention to cash.

However, one of the big issues that the Omicron variant is expected to create is how many will be forced to miss work, as the speed of  contagion is very high. It is noteworthy that about 6,300 flights were canceled by airlines around the world on Christmas weekend, with the Omicron variant disrupting travel during the holidays, as company employees – mostly pilots – were in quarantine!

Increases of up to 40% in basic products

At the same time, record increases that in some cases can reach up to 40% (eg in spaghetti), are expected to appear on supermarket shelves from the beginning of next year, according to market officials. At the same time, supply chain problems can lead to a shortage of products.

The owner of the supermarket Sklavenitis, who had a meeting with the Prime Minister at the Maximos Mansion, has already reportedly warned that big increases in mass consumption products ranging from 20% to 40% are coming in the new year, while he also warned of possible shortages.

At the same time, the BoG is sounding the alarm for the course of inflation, predicting that consumer prices will increase more than 3 times compared to the government’s forecasts, which are contained in the 2022 budget.

“A stronger and longer-lasting rise in the prices of energy and other raw materials may keep inflation high for extended periods of time and destabilize expectations for it, causing a faster tightening of monetary policy, thus increasing the risk of financial turmoil. markets and reversing the upward trend of economies,” states a relevant report.

This will lead to a jump in the consumer price index by 3% in 2022, when the government forecasts only 0.8%, within the text of the budget. The downward trends will start at the end of 2022, leading the Harmonized Index of Consumer Prices close to its central trend which is 2%  for Greece. In 2023 it is estimated that this index will fall below 1%.

It is recalled that inflation rose sharply by 4.8% in November this year from an increase of 3.4% in October while it is projected to exceed  5% by quite a bit in December.

According to the BoG’s interim report, however, there are risks associated with the pandemic, accelerating inflation, a possible increase in non-performing loans (NPLs) after the end of government support measures and possibly a low absorption rate. NextGenerationEU funds. For example, new coronavirus mutations, if proven resistant to vaccines, could hurt confidence, limit tourist flows and slow recovery.

The main source for the creation of new red loans is considered to be the stock that remains today under a protection regime (Bridge 1, 2, step up bank programs, etc.) which amounts to 9 billion euros. This risk becomes even greater if, with the withdrawal of support measures, employment does not improve. The rise in inflation is also aggravating.

Electricity prices soar

In addition, consumers are trapped in the vortex of successive price increases. It is worth noting that the real increases for consumption in October, November, December in the price per kilowatt hour are estimated to range from 105% to over 203% (based on the price per kilowatt hour of C1-PPC (without subsidy-discounts), while the corresponding kilowatt hour is estimated at that it will rise even more!

Electricity increases are expected to continue not only in the last month of 2021 but also in 2022. Safe forecasts show that for the first quarter of the new year the price race will continue. This is the conclusion reached by market participants looking at TTF gas contracts. Those of January are traded at levels even 179 euros / MWh, of February they are at 176.3 euros / MWh and of March at 166.8 euros / MWh.

The rally in oil prices will also include those in electricity, given that this particular fuel is dominant in electricity generation.

Social issues

All of the above create real issues for households and small and medium-sized enterprises, having to face great risks at a time – anything but favorable.

The increase of the registered unemployed in OAED for the month of November by 103,455 (increase of 11%) confirmed that after the end of the tourist season and the support measures important issues arise

The number of unemployed in OAED again exceeded the psychological barrier of 1 million unemployed, reaching 1,091,618, compared to 987,763 unemployed last October.

At the same time, according to the latest Eurostat data, more than one in four citizens in Greece – to be precise 27.5% – are facing the spectrum of poverty and social exclusion, a sign that the country is entering a critical phase. , despite the expected large GDP recovery for 2021.