BoG is worried about prices
Stournaras expresses concerns about inflation and the absorption of European subsidies
Bank of Greece Governor Yannis Stournaras suggests in the Monetary Policy Report published on Wednesday that the containment of salary raises and goods and services price hikes to levels compatible with the medium-term inflation target, as well as increased checks to ensure respect of competition rules and the imposition of sanctions where necessary and, finally, the removal of all kinds of obstacles to competition.
The Bank of Greece has been carefully studying the issue of inflation lately, saying it is a key source of concern, as it finds, among other things, that many supermarket products are more expensive in Greece compared to abroad, while it predicts that the expected increases in wages will make service inflation more persistent going forward. Stournaras, however, touched on other problems of the Greek economy, which include its production model and long-term sustainability, along with structural problems in the labor market, increasing household savings, ensuring citizens’ access to housing on acceptable terms, the large investment gap, and low structural competitiveness.
He also revised lower the growth projection to 2.2% for this year, and higher for 2025 to 2.5%, before slowing to 2.3% in 2026.
The BoG is once again warning of the significant risks for the economy’s prospects resulting from the lag in spending related to the resources of the Recovery Fund, stressing that it can affect investment, and therefore growth, as well as limit the fiscal stimulus. Examining the 2021-2023 period, it even points out that in Greece, due to the significant under-execution, the contribution of total investments to the growth rate of the economy was 2.2% less than the initial forecasts.
Finally, with the phrase “Uncertainty about the future course of food inflation is high,” the central bank foresees not only the significant degree of concern about the course of food prices, but essentially the maintenance of prices at high levels, despite the de-escalation recorded in recent months.
