European Commission: Inflation in Greece at 8.9% in 2022 – Growth at 4%

The Commission is predicting a leap in inflation to 8.9% for Greece in 2022, while at the same time it estimates that growth for the country’s economy will reach 4%.

According to the European Commission’s summer estimates, headline inflation is forecast to reach 8.9% in 2022 and 3.5% in 2023.

Also, real GDP is projected to grow by 4% in 2022 and slow to 2.4% in 2023.

Two months earlier, in mid-May, in its spring estimates, the European Commission predicted a growth rate of 3.5% and inflation of 6.3% for Greece this year. Due to the significant revision to the 2022 figures the growth rate for 2023 has been revised to 2.1% from 3.1% forecast in the spring estimates.

Growth

Economic growth in Greece maintained its momentum in the first quarter of 2022, with real GDP growing by 2.3% quarter-on-quarter. Stable consumer spending was supported by positive developments in the labor market and investments increased significantly, the Commission points out in its summer forecasts for the European economy.

Net exports shrank due to a slowdown in Greece’s main trading partners as well as ongoing global supply chain disruptions. Growth in the first quarter outstripped earlier estimates, but the full impact of higher inflation and the resulting squeeze on real disposable income is expected to be felt later this year.

In addition to maintaining high inflation, weakening momentum in job creation, particularly due to the weaker recovery, is expected to act as a drag on household spending in the coming quarters. Growth in 2022 is also expected to be supported by the Recovery Fund, notes the Commission.

Tourism

Tourism, which is estimated to return to pre-pandemic levels by 2023, will also provide a boost. Overall, real GDP is forecast to grow by 4% in 2022 and slow to 2.4% in 2023.

Looking ahead, increased uncertainty is expected to further reduce demand for new jobs and, combined with the still high rate of inflation, is expected to weaken growth in 2023. In addition, weaker growth prospects for the economy, as well as tighter lending conditions, are expected to slow private investment, despite the stimulus from the Recovery Fund. Exports of goods are expected to slow compared to the previous forecast given the less supportive external environment.

Read also: Inflation, rising interest rates and the position of Greece

Inflation

Consumer price indices continue to rise, mainly due to the boom in international energy and food prices. The overspill to the rest of the consumption basket is expected to keep inflation high for the entire forecast horizon. Headline inflation is forecast to reach 8.9% in 2022 and 3.5% in 2023.

The risks have increased. Factors that may affect a drop in growth dynamics are linked to the tourism sector in light of the uncertain spending power of inbound tourists and heightened geopolitical tensions in the region. Positive factors relate to more positive labor market dynamics that could provide stronger than expected support to household income and hence raising private consumption.