Greece had the second highest growth rate in the eurozone last year, at 8.5%, only behind Ireland, and will this year post the fourth highest, at 4.9%, the European Commission estimated on Thursday in its winter forecasts. It also projected a robust 3.5% growth rate, which places Greece in eighth place in the eurozone.
Brussels has upgraded the growth rate for the entire eurozone in 2021, from 5% to 5.3%, as the recovery has proved stronger. For Greece, the upward revision was even more significant, as the fall forecasts had spoken of a 7.1% economic rebound last year.
Such revisions have recently been made by most banks and agencies, and if they are vindicated by the official data of the Hellenic Statistical Authority (ELSTAT), that would improve the deficit and debt indexes of 2021 as a ratio to gross domestic product. It would also secure some fiscal leeway, though that is to be exhausted by the reduction of Single Property Tax (ENFIA) dues. In contrast, the growth rate for this has been reduced – though that is largely due to the comparison with a higher GDP in 2021.
The Commission added that EU-harmonized inflation in Greece was the lowest in the eurozone, at 0.6% (the national consumer price index stood at 1.2%), while the bloc’s average rate was at 2.6%. This year Greece is projected to have 3.1% inflation, against a eurozone mean rate of 3.5%, and next year it is seen returning to 1.1%, compared to 1.7% in the eurozone. In the first quarter it is seen reaching 4.6%.
Nevertheless these estimates have not had the second rise in the minimum wage factored in, as Brussels concedes, observing that so far salary pressure has been limited due to the persistently high unemployment rate.
The report, although generally positive, stresses there are high risks involved: The two biggest concerns are that the pandemic could threaten tourism (given the major impact it could have on arrivals) and the increase in exports’ costs may threaten domestic production.