Economic growth in Greece is set to accelerate, according to BMI Research, a subsidiary of Fitch Solutions, as the firm raised its estimate from its initial 1.6% forecast for 2024 to 2.4%, noting that consumption and investments, aided by the financing from the EU’s Recovery Resilience Fund, will be the driving forces behind the expansion.

As the research firm explained, Greece’s GDP expanded by 0.2% in the fourth quarter of 2023, following a 0.1% contraction in the third quarter, resulting in an annual growth rate of 2% for 2023 (BMI forecast: 1.9%). In this context, it raised its growth forecast for 2024 from 1.6% to 2.4%, as key growth drivers exceeded expectations.

The increase in private consumption accelerated faster than anticipated, rising by 1.4% quarterly in the last quarter of 2023, while exports also provided an upward surprise, recording a 0.4% increase (compared to BMI’s expectations for a contraction).

Comparatively better prospects for exports are one of the main factors behind the upward revision of Greece’s growth prospects for 2024, as the mild growth in the eurozone was expected to be the most significant brake on production, explains BMI.

The Role of Private Consumption

Private consumption will add 1.4 percentage points to growth in 2024 and 3.3 percentage points in 2025, as disposable income is boosted by increases in business wages and the decline in inflation.

Inflation has de-escalated significantly during 2023, dropping from a peak of 12.1% in September 2022 to 3.2% in February 2024.