The Greek economy is expected to grow by 7% this year and by 3.9% in 2022 according to the latest Regional Economic Prospects report published by the European Bank for Reconstruction and Development (EBRD) on Thursday.
More specifically, the EBRD said that the economic recovery will speed up as the country promoted significant infrastructure projects. However, it notes that significant downward risks remained, especially in relation to the coronavirus pandemic and its impact on tourism and other services.
The Greek economy recovered strongly after a 9.0% contraction in 2020. In the first quarter of 2021 the country’s GDP grew by 4.5% and by 3.4% in the second quarter. EBRD said fiscal policy remained focused on measures to deal with the crisis, with the fiscal deficit likely to exceed 7% of GDP for the second year in a row. However, the implementation of the Recovery Fund is expected to contribute significantly in boosting economic growth.
The EBRD has raised its forecast for its regions for 2021 to 5.5 per cent. While this represents an upward revision of 1.3 percentage points over its June forecast following a strong performance in the first half-year, the Bank warned of serious threats ahead.
High commodity and energy prices, tight labor markets, supply chain disruption and currency depreciations in some EBRD economies have begun to push up inflation, without even accounting for the latest spike in Covid-19 infection cases. On average, inflation in the EBRD regions exceeded its end of 2019 levels by 3 percentage points in September 2021.
In response, several central banks in the EBRD regions have raised policy interest rates. In some EBRD economies tight labor markets added to inflationary pressures with a strong rebound in vacancies in lower-medium skilled occupations. In other economies, considerable slack in the labor market remains. Unemployment increased by 1.4 percentage points on average between February and August 2020, while labor force participation fell by half a percentage point on average. [AMNA]