BoG sees economy growing 2.2% in 2023

The Bank of Greece projects an acceleration in Greece’s recovery after 2023 and a gradual decline in inflation, with the economy expected to grow by 2.2% in 2023, 3% in 2024 and 2.7% in 2025, the central bank said in its Monetary Policy Report 2022-2023, which was presented to the speaker of the Greek Parliament and the cabinet.

The inflation rate is seen easing to 4.3% in 2023 from 9.3% the previous year, and to decline further to 3.8% in 2024 and 2.3% in 2025, though food, non-energy industrial goods and services are expected to add to inflationary dynamics.

The bank report noted the continued challenges as regards the goal of real convergence, given that Greece’s per capita GDP corresponds to about 55% of the per capita GDP of euro-area countries, compared with about 70% before the debt crisis.

“Catching up requires sustained growth rates well above the euro-area average. Otherwise, it could take more than 15 years for the Greek economy to regain its pre-debt crisis level relative to the euro area. This necessary continued convergence process requires the implementation of substantial investments, which must either be financed by national savings or be covered by capital inflows from abroad. However, to enhance investment, in particular to attract foreign funds, the appropriate conditions have to be in place – i.e. a business-friendly environment, highly qualified and skilled human resources, and high-level infrastructure and networks. Leaving the Greek economy’s structural weaknesses unaddressed would make it vulnerable to exogenous shocks that may halt the catching-up process that has resumed in the past few years,” the bank said in a press release.

This performance can be achieved on condition that, in the external environment, the geopolitical crisis de-escalates, energy prices fall and the Eurosystem’s monetary policy tightening has a limited adverse impact on the euro-area economy. In addition, the projections rest on the assumption of continued support of international tourism to the Greek economy, progress with the implementation of investment projects and a solid growth path of the euro-area economy, which is Greece’s major trading partner, the BoG press release noted.

Downside risks include a further deterioration of the external environment, higher and more persistent inflation and a lower-than-expected absorption rate of EU funds.