The Bank of Greece (BoG), the country’s central bank, forecasts a 2.2% growth rate this year, rising to 2.5% of GDP in 2025 and easing to 2.3% in 2026, while inflation is forecast to reach 3% on an annual basis this year, nearly one percentage point above the 2% target set by the European Central Bank (ECB).
The forecasts were unveiled on on Monday.
EU funding 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 prices for foods, 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.
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 situations worsen, they could significantly lower growth rates by increasing uncertainty and exerting upward pressure on energy prices.
In terms of sustainability of the public debt, the Bank of Greece predicts that due to the increased expenditures during the pandemic, the subsequent energy crisis and related fiscal expansion, the public debt-to-GDP ratio will have an upward course in the medium term. Additionally, gross financing needs, as a percentage of GDP, will also rise, though to a lesser extent.
