Energy costs to eat up 12% of Greek GDP

The global shock from the energy rate jump will have such a major impact on the Greek economy that the total cost of energy in Greece will amount to almost 12% of the country’s gross domestic product, some four times higher than just a couple of years earlier, according to Wood & Company.

The Prague-based investment firm has estimated that after the outbreak of the war in Ukraine the gross domestic product of all countries it surveys in Europe and the Middle East will shrink by 2% compared to its previous projections, while inflation has a strong chance of topping 10% if global oil rates average at $120 per barrel this year.

For Greece, Wood anticipates that growth will only amount to 2%, down from the previous estimate for 4%, and makes a particularly alarming estimate on inflation, expecting it to reach as high as 14.7% in 2022, against 8.4% before the Russian invasion.

It goes on to note that the biggest shock for economies will come by way of the energy rate hikes, so it focuses on their impact on state finances. 

Wood & Company therefore calculates that this year’s energy costs will set Greece back by 11.9% of GDP, against a cost of just 3% in 2020, 4.5% in 2019 and 5.5% in 2018.

Across the European Union it expects energy costs to amount to 9.8% of GDP, against 2.4% in 2020, and in the eurozone to 9.1% from 2.2% two years ago.

Regarding the total bill of Greece’s imports, Wood estimates that it will come up to $19.46 billion this year, from $4.39 billion in the year of lockdowns, i.e. almost five times higher than two years ago.

For the eurozone the total cost of imports is projected to amount to $969 billion, compared to $221 billion in 2020, and in Germany in particular the cost of imports is seen soaring to $262 billion from just $60 billion in 2020.

In terms of imports alone, Greece is projected to spend as much as $14.3 billion this year, from $3.5 billion in 2020, with crude oil imports reaching up to $9.1 billion (from $2 billion in 2020) and those of natural gas to $3.7 billion (from $1.1 billion two years ago). Solid mineral fuel imports will amount to some $200 million.