Warning of growth slowdown

The Parliamentary Budget Office has highlighted in a report the positive course of the Greek economy and the improvement of the fiscal result by 12.2 billion euros. However, the report presented by the office’s head, Frangiskos Koutentakis, refers to the “soft landing” of the economy, with the prospect of a significant slowdown in growth in the coming months.

At the same time it stresses the risks associated with the ballooning of the current account deficit, the political uncertainty regarding the chances of forming a stable government, and the political polarization ahead of elections.

With regard to the course of the economy in the third quarter of the year, the report considers that the €12.2 billion fiscal improvement achieved in the year’s first 10 months on an annual basis, which was mainly thanks to the increase in public revenues by about €7 billion, ensures the fiscal targets for the current year.

On the other hand, the limitation of the growth rate during the third quarter (2.8%) compared to the previous two (7.8% and 7.1%) is highlighted, resulting in it reaching 5.9% in January-September 2022. Unemployment fell to 11.3% and the current account deficit continues to widen mainly due to energy costs. Inflation shows signs of deceleration, slowing to 8.8% in October (in harmonized consumer price index terms) from 12% in September.

According to Koutentakis, the Greek economy is entering a “soft landing” phase, with the prospect of a significant slowdown in growth in the coming months due to the negative impact of inflation on real disposable income and consumption, the decline in economic activity in the main trading partners, the rise in lending rates, and the expected lifting of most fiscal support measures. 

The rate of absorption of European resources as well as the degree of implementation of the investments financed by the Recovery and Resilience Facility are expected to be critical for the course of the economy in 2023.