Greece: Prices are surging – Inflation close to 11%

Price hikes confirm the adverse scenarios on inflation for 2022, which, in May, may well exceed 11% in Greece. Eurostat data on inflation across the Eurozone and the fuel and commodity price surge in Greece forebode a new all-time high for the national price index, as well.

According to the European statistics agency, inflation in Greece soared to a new high in May – to 10.7% from 9.1%, in April. However, the finance ministry’s forecasts – when submitting the Stability Program to the Commission – do not indicate that this year’s inflation will end with a double-digit rate. Inflation will rise this year to 5.6% and the consumer price index will rise by 1.6%, in 2023, and by 1.7%, in 2024 and 2025.

Energy costs have pushed up fixed expenses for households and businesses, while, more specifically, travel expenses – due to soaring gasoline prices – have skyrocketed. Since February, the price of unleaded has risen by more than 20% and the market is sounding the alarm about a rise in petrol prices above 3 euros per liter.

According to the data, the average price of regular unleaded from 1.892 euros per liter, on 24 February, has soared to 2.277 euros per liter, on 30 May.

The estimates of analysts

Analysts estimate that inflation has not reached its peak, foreshadowing the recording of double-digit rates in the coming months, expecting a deceleration towards 2023. The intensification of inflation makes the Greek governement work out various alternative plans to absorb the costs based on the economy’s resilience.

According to the Ministry of Finance, the Greek state has provided: 43 billion euros of support measures to come up against health crisis, subsidies amounting to 3.5 billion euros so far to help households and businesses tackle the increased energy costs, support for vulnerable households, support for the primary sector, fuel subsidies amounting to 900 million euros and a double 9.7% increase in the minimum wage, in 2022. A few days ago, the European Commission’s report on Greece photographed the submission of a supplementary budget in autumn, the aim of which is to decrease the effects petrol price rises have on consumer incomes. The Greek government is working on targeted measures of around 800 million euros, which have not yet been granted.

As reflected in the Eurostat data published yesterday, the price hikes “lifted”  inflation in Greece to the fifth highest position in the Eurozone, behind Estonia’s 20.1%, Lithuania’s 18.5%, Latvia’s 16.4%, and Slovakia’s 11.8%. Inflation in the Eurozone jumped to 8.1%, in May, from 7.4%, in April, against estimates of a 7.7% rise. Right behind Greece are the Netherlands with an inflation rate of 10.2%, Belgium at 9.9% and Luxembourg at 9.1%. As for the other southern countries, Italy had inflation of 7.3% in May, Spain 8.5% and Portugal 8.3%. The lowest inflation rate for May was again recorded in Malta at 5.6%, while France’s inflation was slightly higher at 5.8%. Germany moved considerably higher with an inflation rate of 8.7%.

Analysts’ forecasts do not point to a decline but they support that eurozone inflation has not yet peaked, despite a new record high of 8.1%, in May. This was reported yesterday by Goldman Sachs’ chief economist for Europe, who also expects the European Central Bank to raise interst rates in the coming meetings. Speaking to CNBC, Stern said that Goldman Sachs expects the European Central Bank to raise interest rates by 25 basis points at each meeting over the next 12 months.