Winter forecasts Commission: Growth 8.5% for 2021, 4.9% for 2022 and 3.5% for 2023

Strong growth of 8.5% for 2021, 4.9% for 2022 and 3.5% for 2023, the European Commission forecasts for Greece according to its winter economic forecasts published today, revising upwards its forecasts for 2021, compared to those of November (7.1%) and slightly downwards for 2022 (5.2%).

According to the Commission report, real GDP in Greece increased by 2.7% in the third quarter of 2021, reflecting strong export performance and the significant contribution of private consumption. The remarkable recovery of tourist inflows in the summer helped the economy recover a significant portion of its previous losses due to the COVID-19 pandemic, while the industrial sector recovered strongly. The recent emergence of the Omicron variant and the relative tightening of containment measures are expected to have affected growth in the last quarter of 2021, but its impact is projected to weaken significantly in the first quarter of 2022. Overall, real GDP is expected to have grown by 8.5% in 2021.

Growth in 2022 is projected to be stimulated by investments, supported by the Recovery and Sustainability Plan. As consumer spending returns to pre-pandemic levels, private consumption is also expected to support growth. In addition, the external environment is projected to remain supportive. In particular, tourism is expected to continue to recover from its previous losses, until it fully returns to pre-pandemic levels by the end of the forecast horizon. Overall, real GDP is projected to increase by 4.9% in 2022 and decrease to 3.5% in 2023.

Inflation-driven inflation, driven mainly by energy prices, rose in the last quarter of 2021. Electricity and fuel prices are expected to peak in the first quarter of 2022 and fall later in the year. The high energy costs are then expected to burden the rest of the consumer basket. Total inflation in Greece is projected at 3.1% in 2022 and 1.1% in 2023.

Wage pressures have so far remained limited due to the still large easing in the labor market. The authorities announced an increase in the minimum wage in mid-2022, the size of which will be determined later in the year and therefore is not included in this forecast.

Finally, the Commission notes that the risks to forecasts remain high. Despite the rapid recovery so far, the evolution of the pandemic is a source of uncertainty especially for tourist arrivals. In addition, the forecast presupposes only a limited negative impact on production from the significant increase in input costs. On the other hand, the accumulated savings stock during the pandemic could facilitate a bolder increase in private consumption. The strong performance of exports of goods from 2020 could be indicative of structural improvements in the external sector, which could be a source of additional upside risks.