ECONOMY

More inflation pressure seen if crisis worsens

More inflation pressure seen if crisis worsens

Citing the most recent data, analysts expect that the Ukraine crisis will bring more persistent inflationary pressures to Europe and Greece, with all that entails for citizens’ disposable income.

More specifically, analysts say the prospect of energy prices returning to lower levels is receding, adding that these high prices will be incorporated into business costs, affecting the overall price level upward. They were quick to note, however, that at least for now, they do not predict a derailment of the economic recovery in 2022, as the current dynamics are strong and able to compensate for any limited losses due to inflation.

On the other hand, according to sources at the Finance Ministry, there may be a burden on a fiscal level due to the perseverance of high electricity prices for a longer period than estimated.

In this case the state budget will need to contribute, so that the government will continue to provide support to citizens who can’t pay their electricity bills, as the resources of the Green Fund are finite and will be exhausted. This means that any budgetary leeway the government has for extra support measures for vulnerable households will be reduced or eliminated. So far, the Green Fund has subsidized electricity bills to the tune of 400 million euros in January and €350 million in February, through emissions rights.

Analysts stressed that their estimates are based on the conditions that prevailed until Tuesday – with no war and without heavy sanctions by the European Union against Russia. If the crisis escalates and oil climbs to $150 a barrel, they point out, the situation will be different.

According to analysts, the Greek economy can withstand good and mediocre scenarios. However, in the case of war, the situation will be different.