Because the economy can withstand multiple crises

By Tasos Dasopoulos

Despite the successive coronavirus crises in the two years 2020-2021 and the high inflation in food and fuel from the end of last year until today, the Greek economy appears more resilient than other larger EU economies.

This, based on the forecasts announced recently by international organizations, institutions and rating agencies that closely monitor the Greek economy, each in its own capacity.

The Bank of Greece revised its growth forecast for this year from 4.2% in December to 3.7% and 2.8% for 2023 a month earlier.

The always conservative IMF with Greece, in its report on the economy based on Article IV, forecasts growth of 3.5% and 2.6% in 2023. The two rating agencies that upgraded Greece’s debt one step down from the investment level were also optimistic about growth in 2022, but also for the coming years. DBRS, in a report released after the upgrade of Greece, estimated that economic growth will reach 4.3% this year and 4.4% in 2023.

Respectively, Standard & Poor’s estimated that the Greek economy will grow by 3.4% in 2022 and over 3% for the coming years.

The common denominator of all the forecasts is that the economy has benefited significantly from the resources of the Recovery and Resilience Fund and the dynamics that the economy has developed since 2021. They all urge them to continue the reforms and reduce the red loans in the banks’ portfolios.

A second source of optimism is tourism, for which there are very positive forecasts as they will weaken even more – until they disappear completely – the restrictive measures against the spread of coronavirus, bringing the industry’s turnover back to 2019 levels and possibly higher.

In the medium term, everyone sees that Greece has the potential to exceed the EU average growth by increasing per capita GDP from the low levels it had reached during the 10-year crisis.

On the crucial issue of high inflation, they all agree that it will increase in the short term, but due to the fact that it is purely imported, it will fall below 2% of GDP in the medium term, while the effects of the war in Ukraine are considered to be manageable.

Against all this, the Ministry of Finance follows the tactics of conservative forecasts this year as well, setting the growth bar at just over 3% for 2022, maintaining growth in the same area until 2025. In terms of tourism recovery, it is maintained. the forecast for recovery of 85% in 2019.

Financial management

In the field of financial management, all foreign agencies highlight the best expected results for 2021, recording a deficit of 2% of GDP and debt of 3.8% of GDP compared to the budget targets.

For this year, they expect the primary surplus to be higher than the 1.4% of GDP projected in the budget (they see it close to 2% of GDP) due to the additional support measures that the Greek government will need to implement to support households and businesses towards wave of accuracy from fuel and food. However, everyone seems satisfied with the fact that Greece aims to return to primary surpluses by 2023.

Debt sustainable

Another point on which institutions and rating agencies agree is on debt sustainability, which despite the increase due to the coronavirus continues to have very low financing needs (below 15% on an annual basis), long maturities (over 20 years) and more than 2/3 of the debt is in the hands of the official sector and at very low interest rates.

At the same time, everyone agrees that the high cash resources of the State, which remain close to 40 billion euros, constitute an additional, strong shield of protection against market fluctuations.

The EU Fiscal Sustainability Report moves in the same direction, listing Greece’s long-term sustainability risks as “moderate”, ranking them in the “middle” group of countries, when 9 countries (including Belgium, Italy and Spain) are classified as “high risk”.