The European Commission “sees” Greece’s economic growth remaining high in 2023 and 2024, twice the eurozone average, primary surpluses around 2.5% over the next two years, an increase in investments due to the Recovery Fund, as well as lower unemployment and public debt.
However, the Commission said in its autumn forecasts that the fiscal outlook is subject to risks such as cases pending in the courts, most notably the legal cases against the Hellenic Public Properties Company (HPPC). On the contrary, efforts to increase tax compliance through digitization may bring additional revenue to the Greek economy as early as 2024, it added.
According to the European Commission, economic activity is expected to grow by 2.4% in 2023, before gradually moderating to 2.2% by 2025. The upward trajectory of the Greek economy is largely due to the implementation of the Recovery and Resilience Plan but also a resilient labor market. Inflation is forecast to ease gradually to 4.3% this year before falling further to 2.8% in 2024 and 2.1% in 2025.
The government debt-to-GDP ratio is expected to decline, mainly driven by nominal GDP growth, but also helped by primary surpluses. The ratio is expected to decrease to 160.9% in 2023, 151.9% in 2024 and 147.9% in 2025.
The general government deficit is set to shrink further due to moderate spending growth and higher revenues. “Together with steady nominal GDP growth, this will help reduce the high public debt-to-GDP ratio.”
The Greek economy recorded steady growth in the first half of 2023, driven mainly by consumption and exports, according to the Commission.
Although inflation will slow, pressures remain
Based on the Commission’s forecasts, inflation is expected to decline to 4.3% this year and remain above 2% in the next two years (2.8% in 2024 and 2.1% in 2025). “Monthly readings show a rise in inflation in the energy and services sectors while food prices are affected by recent flooding in the Thessaly region, a key area for agricultural production.
In the longer term, stronger wage growth is set to increase pressure on prices.
Resilient labor market and increasing pressure on wages
Employment growth is expected to continue, albeit at a slower pace. Unemployment will fall below 10% in 2025, the lowest level for more than a decade. For the current year, the Commission estimates that unemployment will fall to 11.4% and even further to 10.7% in 2024.
