The European Commission released its winter forecast, according to which Greece’s real GDP rose by 2.2% in 2023, instead of the initial estimate of 2.3%.

The report notes that consumption growth remained notably reduced despite a robust recovery in 2022, adding however, that it remained one of the main drivers of growth last year.

As market experts say, despite stricter funding conditions, investments contributed significantly, thanks to strong construction activity and the implementation of the Recovery and Resilience Plan (Recovery Fund). “The slower-than-expected recovery of Greece’s main trading partners in the EU affected export growth, but net exports made a positive contribution to growth,” they stress.

The EC expects growth to remain generally stable at 2.3% in 2024 and 2025, while real consumption is expected to expand at the same level in 2023, resulting in a slightly lower contribution to real GDP growth.

Investments are forecast to significantly spike as the implementation of the Fund accelerates and funding conditions ease. The composition of gross fixed capital formation is expected to shift from construction to more productive investments such as equipment and machinery.

Inflation forecast

As far as annual inflation based on the Harmonized Index of Consumer Prices (HICP) is concerned, the forecast says it assuaged to 4.2% in 2023. Core inflation, excluding energy and food prices, was significantly higher, averaging 5.3% in 2023, but fell below the level of HICP inflation by December 2023.

Overall, inflation is expected to gradually decline in 2024 and 2025, to 2.7% and 2% respectively. This is marginally lower than in the autumn forecasts and the two years.

The contraction of the labor market, together with the recently announced increase in the minimum wage (from April 2024), is estimated to exert some upward pressure on prices, which will partly offset the impact of lower energy prices on inflation.