ECONOMY PANORAMA ESTIMATES THE GREEK IOBE FOR THE ECONOMY GREEK

For 2023, IOBE expects a more modest annual growth, by 1.4% in actual terms, mainly due to the global economic slowdown, amid higher inflation and uncertainty conditions. In terms of components, investments are expected to contribute the most in reflation, with an annual increase of 8.5%, followed by a relatively robust, though clearly more moderate, growth in private consumption of 0.8%. In the external sector, little further deterioration in the already high current account deficit is expected, with exports and imports increasing annually in 2023 by 2.1% and 2.7% respectively.

It also estimates a milder decrease in the unemployment rate in the third quarter of 2022 to 11.6%, from the 13.0% rate in the third quarter of 2021. The progress of employment in 2022 was mainly determined by the very good performance of tourism, as well as the satisfactory line of exports, consumption, and construction, despite high inflation and high energy costs. Employment in 2023 is expected to be positively affected by the more moderate strengthening of investments, the further utilization of the Recovery Fund resources, the milder rise in consumption and exports, as well as by tourism. These factors are expected to partially offset the – more modest compared to 2022rise in inflation as well as the rise in borrowing costs. The unemployment rate in 2022 is estimated to have fluctuated around 12.3%, while in 2023 it is expected to be around 11.5%.

The rate of fluctuation in the CPI by 9.6% in all of 2022 was the highest since 1994, after a modest 1.2% rise a year earlier. This robust rise is mainly due to the incremental direct effect of energy commodities in the first nine months, and non-energy commodities in the last quarter of 2022. IOBE estimates that values will maintain a more modest upward trajectory this year, in the region of 4%, mainly due to the resilience of consumer demand.

During the presentation of the Report, the general director of IOBE, Professor Nikos Vettas, stated:

• During 2022, the Greek economy recorded particularly significant growth dynamics, with a weakening tendency, following a cycle of fluctuations that arose with the pandemic crisis

• For the assessment of the course of the economy in the short term, there are significant positive factors. Overall, and starting from a lower base, our economy may expand faster than the European average

• The accumulated potential of the Greek economy is greater than that of most European economies. Unemployment, and in general the pool of unexploited labour, remains on high levels, and the investment gap is even greater. The Recovery Fund and the additional inflow of European resources are of high importance and can mobilize broader investments. Extroverted enterprises, mainly manufacturing, have been positioned in global value chains. Public debt, although very high, is currently less exposed to interest rate increases than in other economies

• The external environment is laying pressure on exports and investments due to the slowdown of the reflation in Europe, the continuous increase of interest rates and the high uncertainty. Financial decisions tend to be risk-averse, and therefore more introspective and short-term, just the opposite of what is desired

• The significant deterioration in the trade balance and the high structural inflation, highlight the systematic weaknesses of the Greek economy. The tendency for the trade deficit to widen as growth takes place reflects relatively low competitiveness. The upward trend in main prices of goods and services, as consumption recuperates, suggests little scope for timely output response and low intensity of competition

• It is critical to quickly achieve an assessment of the Greek economy at the investment level. This is a positive sign for the markets, improves expectations and leads to the broadening of the investment base and the de-escalation of funding costs

• The stability of the fiscal balance constitutes a condition for the systematic development of the Greek economy

• On the tax revenue side, there are four positive developments in the current year, from the growth of the economy itself, the effect of the spread of electronic payments, indirect taxes due to inflation and from income taxation as a progressive scale is implemented

• On the public expenditure side, support policies through subsidies, in addition to effects on fiscal and macroeconomic balances, have collateral effects on consumption and tax compliance.

• For Europe, handling the effects of the energy crisis tripartite, inflation and the Russian invasion will be crucial. How the rules for the new fiscal framework will be formed is a bet for further fiscal integration

• For our country, the parliamentary elections in the upcoming months are important for the stability which will allow important investments, as well as for the formation of a medium-term policy that will be able to combine two desirable characteristics: solemnity in a dangerous environment and intention for reformist advancements