The Greek economy’s prospects have a high degree of uncertainty due to the impact of the war in Ukraine, notes Moody’s, a week after staying silent on the country’s credit rating. It has therefore revised upward its estimates on the Greek deficit and inflation and slashed its growth projection.
The rating agency anticipates that the Russian invasion and sanctions against Moscow will reduce growth by at least 2.2 percentage points and warns that the weaker economic expansion and the increased subsidies for energy could put at risk the efforts for fiscal streamlining.
Moody’s concedes that before the Russian invasion Greece’s economy had a very strong momentum and all indexes pointed to a sustainable and robust recovery. The conflict in Ukraine has now sent commodity prices soaring, curtailing the growth outlook to 3% for 2022, even though Greece’s direct exposure to Russia and Ukraine is fairly limited: Russians accounted for just 2% of tourism arrivals and revenues before the pandemic, while only 1% of Greek exports went to Russia and Ukraine.
Inflation is now seen averaging at 5% this year and the budget deficit will come to 5.8% of GDP.