UBS forecasts 2022 GDP growth at 5.7%

Swiss-based investment and financial services bank UBS has significantly raised its growth estimate for Greece’s gross domestic product for 2022.

UBS has raised its estimate to 5.7% from 4% based, among other factors, on the dynamic recovery of the tourism sector, which it expects to post record-breaking revenue of €20 billion, better than the €18 billion achieved in 2019, before the Covid-19 pandemic hit.

Partly because of much stronger growth this year, UBS has revised its 2023 estimate downward to 4% from 4.7% previously.

The first sign that growth would be higher than expected this year was a strong first quarter: GDP rose 2.3% quarter-on-quarter and 7% on an annual basis.

Then came tourism: UBS had estimated 2022 revenue at €15 billion, still a significant rebound from the lockdown-plagued 2021 (€10 billion).

Then, there was the strong recovery in tax receipts in the second quarter, which rose 31% compared to the same period last year. In the same quarter, tourism revenue rose 330% on an annual basis.

A final factor was the recovery in business lending, boosted by funds from the European Union’s Recovery and Resiliency Facility.

UBS still notes that Greece important challenges, such as the likely disruption of natural gas flows from Russia. Still, natural gas imports account for only 9% of Greece’s energy needs, making it easier to find substitute fuels and sources. UBS notes that Greece has a floating liquefied natural gas (LNG) terminal, which is already being supplied by imports from Qatar and the US.

UBS estimated that average inflation for 2022 could end up above 9%, with wage raises failing to compensate for the loss of purchasing power, even with the higher growth creating more jobs.

Household finances are being propped up by generous electricity and other subsidies and by higher savings. Since the end of 2019, households’ bank saving have risen by €20 billion, or 10% of GDP.