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Clouds gather over Greek economy

Clouds gather over Greek economy

An anti-Israel billboard with a picture of Iranian missiles is seen on a street in Tehran, in Iran, on Friday [Reuters].

Storm clouds are gathering over the Greek economy, at a time when, apart from the domestic challenges that continue to overshadow its prospects, such as demographics, climate change and the still large investment gap with Europe, the strengthening of external geopolitical tensions is creating a new scenario of uncertainty.

The already weak growth of Europe’s major economies, which Greece also relies on for investment, exports and tourism, combined with the real risk of new upward pressures on inflation, pose an additional challenge, with the government forecast for growth of 2.9% this year and even the expected revised forecasts (estimated near 2.5%) seem extremely ambitious.

The external macroeconomic environment remains full of challenges, with increased security uncertainties, notes Spyridoula Tzima, deputy vice president of the DBRS Morningstar rating agency, to Kathimerini.

“There is a risk of an escalation of geopolitical tensions (Ukraine, Middle East) which would lead to a rise in commodity prices and put upward pressure on prices. This would delay central banks’ decisions on interest rate cuts and could lead to an additional need for fiscal measures,” notes Tzima.

Global challenges such as monetary policy tightening and geopolitical tensions, as well as domestic events (agricultural activity reduced due to severe flooding) have already affected economic activity, notes Maddalena Martini, senior economist at Allianz. She tells Kathimerini that weak global demand will create new challenges for growth in Greece this year. “We expect GDP growth to reach 1%. Greece has been affected by a slowdown in the destination markets of its top exports, at a time when the country is heavily dependent on exports of services such as tourism.”

Oxford Economics economist Paolo Grignani appears slightly more optimistic, estimating that growth in Greece this year will reach 1.7%. “While weak eurozone growth will certainly negatively impact the Greek economy’s outlook, we remain positive on this, as Greek growth since 2019 was due to a significant extent to domestic demand – i.e. in consumption, as well as in investments,” as he explains.

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