European Commission’s Outlook for Greece Economy Forecasts 2.1% Growth and 3% Inflation in 2024

The European Commission’s autumn macroeconomic forecast for the Greek economy projects a 2.1% increase in Greece’s GDP for 2024, with a generally similar growth rate expected to be maintained in 2025 and 2026, supported by the implementation of the Recovery and Resilience Plan.

The report also highlights that the nominal deficit is expected to decrease from 1.3% of GDP in 2023 to 0.6% of GDP in 2024, reflecting an increase in the primary surplus from 2.1% of GDP in 2023 to 2.9% this year.

This reduction is largely attributed to the restrained increase in current expenditures and higher revenues from income taxes. By 2026, the reduction in public debt is expected to bring it close to 140% of GDP.

Unemployment, currently below 10%, is projected to continue its downward trend, albeit at a slower pace than in previous years. Inflation is forecast to be at 3.0% in 2024, gradually moderating to around 1.9% by 2026.

The Greek economy showed steady 2.1% year-on-year growth in the first half of 2024, driven mainly by domestic demand, while net exports acted as a drag on growth, according to the Commission’s estimates.

Following minimum wage rises, private consumption benefited from a relatively faster rise in wages for lower-income households, which are more prone to consumption. Equipment investment accelerated in parallel with a strong pickup in corporate credit growth, while a surge in imports accompanied by sluggish export growth prompted a decline in net exports.

Real GDP growth is expected to average 2.1% in 2024, largely due to strong domestic demand, according to the Commission’s forecast.

Looking ahead, private consumption is expected to continue growing at a strong pace, supported by steady increases in real incomes. Investments are projected to accelerate further, reaching a peak of nearly 9% in 2025, as the focus of the Recovery Fund shifts increasingly from reforms to investments and financing conditions improve.

The recovery of external demand is anticipated to boost export growth, further supported by past gains in cost competitiveness and structural reforms aimed at improving export performance.

Import growth is anticipated to remain strong, given the high import content of investments. Overall, GDP growth is set to remain above the long-term growth potential and is projected at 2.3% in 2025 and 2.2% in 2026, respectively.

According to the report, Greece’s employment rate increased to 54.9% (persons aged 15-74) in seasonally adjusted terms in the second quarter of 2024 but remains one of the lowest in the EU.

Although employment growth is set to continue, it will be at a slower pace as skills mismatches and structural bottlenecks, such as a lack of child- and elderly care solutions or the tight regulatory framework for part-time employment, limit the increase in labor supply.

However, the unemployment rate is anticipated to decline to around 9.0% by 2026, its lowest level in a decade.

Source: Tovima.com