The Bank of Greece (BoG), the country’s central bank, forecasts a 2.2% growth expansion in a press release published on Monday, while inflation is projected to settle at 3%, nearly one percent off the 2% target set by the European Central Bank (ECB).
European funds and investments are projected to be the primary drivers for growth in 2024, provided the Greek state fully implements the EU recovery plan, while inflation will slow down, reaching 3% due to a drop in food costs, non-energy goods, and services.
Reforms linked to the Recovery Fund are expected to act as a booster for a permanent increase in real GDP and the overall productivity of production factors, the report notes.
According to the BoG’s latest forecasts, the growth rate of the Greek economy is expected to reach 2.2% in 2024, accelerate to 2.5% in 2025, and slightly decrease to 2.3% in 2026.
Regarding monetary policy, the BoG notes that 2024 will see a marginal expansion as a result of investment spending from available EU funds.
The Bank of Greece foresees risks along this path, which may arise from a worsening of the geopolitical crises in Ukraine and the Middle East. Should these developments materialize, they could significantly lower growth rates by increasing uncertainty and exerting upward pressure on energy prices.
Public Debt Regarding the sustainability of public debt, the Bank of Greece predicts that, due to the increased expenditures during the pandemic, the energy crisis, and related fiscal expansion, the public debt-to-GDP ratio will have an upward trend in the medium term. Additionally, gross financing needs as a percentage of GDP will also rise, though to a lesser extent.
