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Why is YPOIK not afraid of stagnant inflation?

Of Tasos Dasopoulos

The average growth of 3.5% for a four-year period, which is ensured by the Community financial instruments in Greece for the next four years, leaves no room for discussion about stagnant inflation, despite the continuing rise in prices.

This was emphasized by a competent source of YPOIK, when asked under what conditions Greece could face the phenomenon of stagflation in the near future.

The Prime Minister was just as categorical in his exclusive interview with Capital.gr“We have no such indication that this is a problem that will concern us in the coming period.

I would tell you the opposite, I will not be surprised at all if in the end the Greek economy grows at a faster pace than those predicted by foreign companies, the European Union and the International Monetary Fund “, Mr. Mitsotakis emphasized characteristically.

In the stability and growth program sent by the Ministry of Finance in Brussels in April, it predicted an average growth of 3.5% for the period 2022-2025. Specifically, the growth rate is expected to reach 3.1% this year and then accelerate to 4 , 8% in 2023 and reach 3.5% in 2024 and 3.3% in 2025.

After the announcement of the growth for the first quarter of the year which reached 7%, the Minister of Finance Mr. Christos Staikouras, referring to this year’s goal for growth of 3.1%, now speaks of a conservative forecast. The conservative IMF, in the report on the evaluation of Greece based on Article IV, forecasts growth of 3.5% for this year.

The European Commission makes the same forecast in its spring estimates, while earlier than the forecasts of international organizations, the Bank of Greece had announced its own forecast, which wants growth for this year at 3.8%.

Based on all this, the first part of inflation, ie anemic growth or even worse a stagnation, is not fulfilled.

The part of inflation

In the second necessary element, for the sliding of an economy in stagnant inflation is the long-term, high inflation. The national consumer price index may have reached 11.3% in May, but structural inflation, ie inflation without food and fuel, is at 4.3%.

This means that despite the rate at which energy and food prices are rising, they do not have a significant impact on the so-called “core” of inflation.

It also means that the problem of inflation is external and does not involve a distortion of internal market competition, which would keep inflation high even after international prices fall.

Also, the concept of stagnant inflation presupposes the maintenance of high inflation for a long time. In terms of a harmonized index of consumer prices, Greece exceeded the average European inflation in January 2022.

Therefore, high inflation for Greece has – -so far – a lifespan of just under six months, a period that can not be described as long, especially in the current situation.

In summary, Greece has today and will maintain high growth rates in the coming years, high inflation has no structural elements, so it will not continue after the decline in prices and finally, despite its monthly acceleration has a relatively short duration. Therefore, the possibility of stagnant inflation for Greece is very small today.

Source: Capital

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