UBS “lowers” the bar for the development of the Greek economy.
In particular, the bank forecast a drop to 4% from 5.5% previously, as it recognizes, as it points out, the upwinds that the economy is facing due to the effects of the war in Ukraine, with the bank still maintaining its positive stance on the country’s prospects due to four factors.
This downgrade mainly reflects four forces, as it notes:
-The lessened growth transfer from 2021
-The downward revision of the growth of the Eurozone to 2.9% in 2022
-The fact that high frequency data implies a smoother start for the first quarter of 2022
-The fact that inflation is becoming a bigger obstacle to growth.
Challenges
Beyond that, UBS reports that GDP growth slowed significantly to + 0.4% on a quarterly basis in successive terms in the fourth quarter of 2021 with downward revisions in the third and second quarters. The slower growth reflected the weakness in the construction industry and several services and could also be related to the stricter mobility restrictions in the 4th quarter of 2021, which reduced carry over.
At the same time, industry shrank by 3.2% on a quarterly basis, retail sales by 1.1% and car registrations by 1.7%.
In addition, Greece’s harmonized inflation rose to 8.0% per annum in March, the highest rate since 1996. Thus, it almost doubled in three months from 4.4% per annum in December 2021. Over 40% of the increase January-March inflation is due to the housing sector (including electricity and gas), while another 40% is due to the jump in food inflation (8.2% per year) and rising prices in hotels and restaurants (5.2% per year).
Positive developments
On the other hand, UBS points out as positive the data for the mobility of the population as well as for the economic activity, which show improvement in the period January-April 2022.
At the same time, business confidence in the first quarter reached its best performance since 2000, aided by the climate in industry, services and construction.
Improvements in the labor market remained in January-February, and the increase in the minimum wage is expected to help boost household incomes. In addition, households are showing an increase in deposits, while the government has taken some measures to support them.
Also, capital inflows from the EU will continue to be a key factor this year, with around € 16 billion or 8% of GDP available for absorption.
Finally, tourism revenues continued to perform very well in January-February, while the start of the tourist season earlier (March 1st) and the easing of mobility restrictions in the near future are expected to allow the industry to record large numbers again. profits.
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