Greece’s economy is expected to expand by 4.2 percent this year, the Bank of Greece said in a monetary policy report on Monday, maintaining its previous forecast.
The central bank said it expects economic activity to have rebounded in the second quarter and to accelerate in the second half of the year.
Its growth forecast tops the government’s 3.6 percent growth projection and the International Monetary Fund’s 3.3 percent forecast.
“The recovery is expected to gain momentum in the second half, driven by pent-up domestic demand, the launch of projects under the National Recovery Plan and an expected increase in tourism receipts relative to 2020,” the central bank said.
It projected the country’s economic growth to pick up next year to 5.3 percent but then ease to 3.9 percent in 2023.
“The increase in savings during the pandemic, either precautionary or forced due to the containment measures, and the release of pent-up demand are expected to support an increase in private consumption expenditure this year,” it said.
The Bank of Greece expects the general government’s primary balance to turn out a deficit of 7.1 percent of economic output this year, calculated under an enhanced surveillance methodology.
Expansionary fiscal measures have weighed on the public debt-to-GDP ratio and the government’s gross financing needs, it said. Still, the long-term sustainability of Greece’s public debt “is not at risk”.
The central bank said financing needs for the coming decade remain marginally at the reference level of 15 percent of GDP, provided that the government’s cash buffers remain high.
“This leaves no room for a relaxation of the longer-term primary surplus targets, while there are increasing risks in the event of negative shocks,” it said.
Although Covid-19 vaccinations are on track, the bank added, the spread of coronavirus mutations are a source of uncertainty and a worsening of the pandemic could result in a weak tourism season, delaying the return to normality.