IOBE sees 5% growth in 2022

The Greek economy will grow by a remarkable 4.5-5% this year, after soaring 9-9.5% last year, estimates the Foundation for Economic and Industrial Research (IOBE), while also being in favor of a further increase in the minimum wage, as long as it is not excessive.

IOBE Director General Nikos Vettas on Monday presented the think tank’s report on the national economy and said it would make sense to raise the minimum wage further, following the 2% increase at the start of the year, given the strong economic recovery and the need to protect vulnerable households who are spending a large part of their income on commodities affected by the current price hikes.

IOBE estimated that this year the inflation rate will average at 1.5-1.8% on an annual basis, which is a level the economy can stand, but not the most vulnerable households. However, Vettas stressed that emphasis must be placed on cutting non-salary costs, especially social security contributions. Over the first few months of 2022 inflation will range around the level of late 2021 – i.e. near 5% – before receding considerably later. IOBE is one of the social partners that is participating in the ongoing consultations for the adjustment of the minimum wage.

The report that sees cumulative growth of around 14% for 2021 and 2022 also forecasts that the unemployment rate will decline to 13.5% this year. “The Greek economy has a positive momentum,” stressed Vettas, while also noting there are some negative developments and uncertainties.

He cited as negative factors the creation of huge fiscal deficits in 2020 and 2021, which were necessary to tackle the effects of the pandemic. He also cited the universal increase of interest rates, arguing that “it will be crucial that this is not followed by an increase in the spread between the Greek economy’s financing costs and those of other economies in Europe, if not showing a reduction.”

Among the uncertainties are also inflation and the negotiations on the European Union’s new Stability Pact.