Despite high inflation, the Greek economy has proven to be resilient, prompting BNP Paribas to expect growth of 2.8% in 2022, 2.5% in 2023 and 2.8% in 2024. Characteristically, in the end of the first quarter of 2022, GDP growth was 2.5% higher than pre-pandemic levels, a rate three times higher than the Eurozone average.
Greece is one of the European economies that has recovered the fastest from Covid restrictions imposed in 2020. Unlike other eurozone countries a recession seems unlikely this year, according to BNP Paribas. The unemployment rate has fallen to its lowest level in 12 years, although the workforce has shrunk since the outbreak of the global financial crisis in 2008/2009, especially among young people who emigrated en masse.
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Eyes on Greece
The country is no longer at the center of fears about the Eurozone, in part because key economic indicators are now more favorable, and it is likely to benefit from a bumper summer tourist season. In addition, the political situation in Greece seems more stable than e.g. in Italy, where the coalition under Mario Draghi looks fragile, while the current Greek government enjoys a comfortable parliamentary majority and high popularity.
Debt may be high, but…
At the same time, although Greek public debt is higher than that of Italy, its financing needs are more limited compared to Italy, which is also reflected in the escalation of concerns about the possible fragmentation of Eurozone bonds. The main risk factors for the second half of 2022 are the consequences of monetary tightening in the Eurozone, but also rising inflation, given that a large part of consumer products in the country are imported. Although energy is the main driver behind the rise in inflation, BNP Paribas points out that prices are also rising in food, hotel and restaurant services and household goods.
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