Financial Council: Conservative growth forecast of 6.1% in 2021 – The three risks for 2022

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The Hellenic Financial Council (EDS) characterizes the budget forecast for growth by 6.1% this year as conservative. According to the forecasts of international organizations, the growth of the economy will reach the region of 7%, while pointing out three risks.

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In its autumn report, EDS appears optimistic about the course of the economy in 2021, implying that it will definitely be over 6.1%, while for 2022 it agrees to the forecast for growth of 4.5%.

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However, he points out three dangers that could overturn these predictions:

1. The unexpected prolongation of the pandemic: As noted, possible revivals of the pandemic in Greece and possible restrictive measures that they will bring, will slow down the growth of economic activity. About half of the projected GDP growth in 2022 is due to the strengthening of private consumption which, according to the Ministry of Finance, is projected to increase by 2.9% compared to 2021. Possible restrictive measures will directly affect private consumption. The increase in private consumption is projected to be based in part on the positive change in wages (3.0%) which will come mainly from the increase in the total volume of wage employment and secondarily from the increase in the average wage per wage of the employee. work. Based on the above, the possible slowdown in private consumer spending due to restrictive measures will have negative effects on the volume of employment, creating a negative downward spiral resulting in the limitation of GDP growth.

2. The delay in the utilization of the resources of the Recovery Fund: . It is specifically noted that the critical assumption of the Ministry of Finance is that all payments made by the Recovery and Resilience Fund will be automatically converted into investment expenditure. The important role of public investment (about 60% of the total) reduces the uncertainties associated with the level of private investment, however, it is crucial to ensure that the channels for channeling the resources of the Recovery and Resilience Fund into the private economy will function smoothly and quickly. Therefore, the smooth and rapid activation of the investment support schemes financed by the Recovery and Sustainability Fund is crucial for the course of the economy in 2022.

3. The evolution of inflation: It is noted that the prolongation of price pressures, which may signal changes in monetary policy in the euro area, may negatively affect macroeconomic developments in 2022. Inflationary pressures in Europe are currently considered by European Central Bank executives to be a rather temporary phenomenon. In this light, it is considered that inflationary pressures will be reduced in the near future to the extent that there will be congestion in the supply chain (avoidance of bottlenecks) and energy prices will be reduced or even stabilized; expansion. Nevertheless, there is no shortage of pressure on the European Central Bank to limit loose monetary policy. If the second scenario prevails, the positive scenario of the Ministry of Finance for a GDP growth of 4.5% in 2022 will be tested.

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Source From: Capital

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