Less growth, numerous risks
Bank of Greece issues list of challenges for the national economy in the coming years
The Bank of Greece has lowered its forecast for this year’s growth to 2.3% from 2.5% and is fully aligned with the latest estimates of the European Commission, against the budget’s estimate for 2.9%.
The BoG’s downgrade, the second since December, followed data on last year’s growth, which, while outpacing the eurozone average, came in at a slower pace of 2%.
It noted that the main driving forces of economic activity will continue to be investments and private consumption, while the contribution from abroad will be marginally negative. Monetary policy will continue to be accommodative, while public investment will contribute positively to growth thanks to the Recovery and Resilience Fund.
However, the BoG points to risks of a further slide in the growth rate due to a possible worsening of the geopolitical crisis in Ukraine and the Middle East, with the consequent consequences for the global economic environment, a lower-than-expected rate of absorption and use of the structural funds of the Recovery Fund and the EU, possible delays in the implementation of the reforms, which will pull the brakes on the process of improving the productivity of the economy and the competitiveness of businesses, and possible extreme weather events.
The BoG identifies 12 important challenges facing the economy: control of inflation; accelerating investment, partly by mobilizing available European funds; addressing potential labor market shortages and skills mismatches; planning climate adaptation strategies and disaster prevention measures; ensuring energy security through investments in clean energy; maintaining fiscal sustainability; effective management of bad loans; maintaining primary surpluses over an extended horizon to ensure public debt sustainability; implementing structural reforms to support long-term growth; dealing with the current account deficit by strengthening the competitiveness of the economy; accelerating the pace of the privatization and reform program; and promotion of innovation, education and knowledge capital.
