BNP Paribas: Greece’s performance is impressive, the economic outlook for 2022 is strong

Her Eleftherias Kourtali

Although the economic situation in Greece remains difficult, significant improvements are clearly visible, as noted by BNP Paribas, and this positive trend is likely to continue in 2022, if the situation on the health front does not deteriorate.

The French bank points out that the Greek economy has been surprised by its performance in 2021, after a record contraction in 2020 due to the health crisis. The European Commission expects a GDP recovery of more than 7% this year, a rate that will remain strong in 2022, rising by about 5%. In the labor market, the trend is also encouraging, with the unemployment rate falling to 13% in September, the lowest level since the summer of 2010.

Of course, there are challenges, he points out. Greece is still feeling the effects of the crises of 2008 and 2011: the size of the economy remains significantly smaller than 15 years ago, the youth unemployment rate is still too high high and investment, as a percentage of GDP, are the lowest in Europe.

At the same time, the level of public debt increased further with the coronavirus crisis, now exceeding 200% of GDP, at a time when Greece is still under the control of the European Commission. The monitoring program, approved in July 2018, aims to pursue key structural reforms in exchange for debt relief measures and is expected to be completed by mid-2022.

However, there have been some structural improvements, BNP Paribas points out. The inflows of foreign direct investment in the country have increased significantly since 2016, and although they decreased in 2020 due to the health crisis, they have recovered strongly since then.

In addition, Greece will receive significant resources from the various European mechanisms, in particular the EU Recovery Fund, which will be an important lever for investment and growth in the country in the long run. A total of € 31 billion will be disbursed through this fund by 2026. This could, according to European Commission estimates, create 60,000 jobs by 2024.

Although fragile, the situation in the banking sector is also improving. The stock of non-performing loans accounted for about 20% of total outstanding loans last June, half of the level recorded at the end of 2019. In October 2019, the government began implementing the “Hercules” plan, which has extended until October 2022 – a fact that reflects its success, which aims to help banks reduce their NPEs portfolio.

As BNP Paribas concludes, “although the economic and social situation in Greece is still difficult, there are real signs of improvement in the country and we can hope that these positive trends will continue in 2022, provided of course that the situation in health front will remain under control “.