The continuing rise in basic product prices, heating and electricity is impacting society and economy causing alarms for family and state budgets. Today’s revelations of the Greek statistical authority seem to officially record the fears for the tsunami of price increases in the month of January. Inflation is likely to rise to 6% from 2.2% in September, while Eurostat preliminary reports already showed an increase to 5.5% in January.
Inflated bills are already knocking on doors of households and businesses, and despite government assurances that support will continue, the pressure is mounting.
In addition to revenues, the increases are also burdening the state budget, as the course has deviated from the initial forecast of 0.8% for 2022. An example of the frantic course is that the Commission has more than tripled the forecast for average inflation this year to 3, 1%, without taking into account the second planned increase of the minimum wage.
What worries economists, international analysts and the government is the unknown factor of “duration”. It is a common European view that from estimates of “transient” inflation we are moving to inflation without a specific time horizon, which is fueled by international turmoil. So far, official forecasts show that the pressures will escalate from the second half of the year without taking into account any outbursts on the international geopolitical front.
The alarm will sound especially in the event of a long-term inflation spike, which will have potential effects on the growth trajectory of the Greek economy in 2022. This is also pointed out by economists – although so far the average estimates for 2022 growth are showing a strong recovery rate. From almost 8-9% of 2021 the economy is expected to grow at a speed of 4.5% -5% with the main reasons for this year the expected performance of tourism and the increase of investments due to the Recovery Fund.
The magnitude of the impact on the economy is blurred by uncertainty. Because the most important risk facing the Greek economy for 2022 is related to the impact of inflation on consumer spending and investment spending planning. According to Alpha Bank, the factors that are expected to determine inflation are a) the dynamics of the evolution of energy prices and b) the formation of the expectations of major economic players. In particular, the way in which both consumers and businesses expect prices to evolve in the future affects the way they spend, borrow and invest their money today.
The government has assured that it will continue the support and has put on the table the expansion of a support package targeting rising prices (mainly with electricity subsidies and not with VAT reductions). The opening of the further measures is placed from March where the final data for the GDP in 2021 will be announced – hence the ” breathing space” given by a larger than estimated growth (from 6.9% close to 8.5%) .
Latest News
ELSTAT: Greek Health Expenditures Reach €5.89 Billion in 2022
Finally, healthcare financing as a percentage of GDP decreased to 8.5% in 2022 from 9.18% in 2021, as per the Health Accounts System report.
Sonoco Paper Mill Plants Close After 30 Years in Greece
The shut down of the two paper mills in northern Greece comes a week after a glass plant closed in Athens
BoG: Private Deposits Down by 1.068bln Euros in Feb. 2024
Corporate deposits decreased by 912 million euros, compared to a decrease of 3.167 billion euros in the previous month
Greeks’ Buying Power Second Lowest in the EU
Greeks’ purchasing power is under pressure, ranking 26th among 27 EU member states.
Greek FinMin Says Digital Work Card Tackling Undeclared Work
Greece's recently launched digital work card aimed at tackling undeclared labor has already started to produce results, said Economy and Finance Minister Kostis Hatzidakis
MSC Cruises: More than 400 Visits to Nine Greek Destinations
MSC Cruises, a subsidiary of international shipping line Mediterranean Shipping Company S.A, will be sailing to Greek ports as of this month, expanding operations in the region year-round
Eurostat: Greece Among Cheaper Hourly Labor Cost Zones
In contrast, the countries that posted the highest hourly labor costs are Luxembourg (53.9 euros), Norway (51.9 euros), Iceland
GSEVEE: Economic Sentiment Indicator in Greece Down in Q2 2023
The drop follows a significant uptick in the ESI in the second half of 2022 (69.5 units) and a slight decline in the first half of 2023 (66.7 units)
Manpower Report: Sectors in Greece that Have Achieved Full Gender Equality in the Workplace
Greece surpasses this with 45%, showcasing progress but also room for improvement. Sectors like Consumer Goods and Services lead with 69% reporting full equality globally
Bank of America (BofA): Three Reasons Greek Economy Outperforms EC Average
BofA projects growth of 1.1% in 2024 and 1.7% in 2025, compared to forecasts for eurozone growth at 0.4%/1.1%, respectively