Inflation in Greece is set to return to 2010 levels next year, according to an economic analysis by Piraeus Bank, while the eurozone has seen its consumer price index rise to an all-time high since the euro area was formed.
Based on the calculation of bureau chief Ilias Lekkos, inflation will climb to 3.8% in Greece in 2022, while averaging around 2% in the eurozone. This large difference is due to the earlier jump in prices across the bloc, that will lead to a speedier easing there.
European Commission Vice President Valdis Dombrovskis told a press conference in Brussels on Tuesday that inflation in the eurozone reached 4.1% in October, its highest since the collection of this series of data started in 1997.
He added that most factors which have led to price hikes “appear to be temporary” and that the Commission’s estimate is that “inflation will gradually decline within 2022, but first it will increase further in the coming months.”
The Piraeus Bank analysis notes that inflation growth in the eurozone is at a very advanced level, as prices in the euro area started going up in January 2021 (mainly due to German value-added tax reverting to pre-pandemic levels) and has kept growing mainly because of the energy rate hikes.
In Greece, on the other hand, the price rise has been a relatively recent phenomenon, as up to last April prices had continued to decline. Since then (with energy being the main factor), inflation has returned, reaching 2.2% in September, though the mean rate in January-September was at just 0.2%.
This gap between Greece and the eurozone will likely see prices in Greece being affected next year, with Lekkos projecting inflation to rise above 4% in the second quarter of 2022, before declining at a rapid rate. Consequently, it will average at 1.2% this year and 3.8% throughout 2022.
All in all, the analysis notes that the rise in inflation is to be temporary, both in Greece and in the eurozone, and prices should return to pre-crisis levels by the end of next year. It adds that the European Central Bank will resist market pressure and keep its interest rates as they are.