<Greece's growth rate is expected to remain strong as a result of two pieces of good news concerning the European Union economy in recent days, according to economic actors with knowledge of the processes taking place in Brussels and Frankfurt.
The first good news concerns the growth rate of the Eurozone in the second quarter of this year which, according to the first indications, shows clear signs of acceleration compared to the first quarter (0.3%). The second concerns the course of inflation which, despite the fact that it remained stagnant in April at 2.4%, is nevertheless estimated to remain on a downward trajectory, in accordance with the objectives set by the European Central Bank (ECB). This strengthens the prospect of a reduction in interest rates, not only in June, but possibly in July as well, if this trend is confirmed over the coming period.
This is seen as an indication that the eurozone is coming out of the technical recession of the last two quarters and also doing so in an environment of declining inflation, which will allow a reduction in interest rates that will increase disposable income, consumption and investments.
This positive environment ensures that the growth of the Greek economy will remain strong based on the forecasts of the Stability Programme for this year and the years that follow, the sources noted.
The Stability Programme submitted to the Commission in the middle of last week predicted a growth rate in Greece of 2.5% for this year and 2.6% in 2025. These forecasts were based on an increase in private consumption on an annual basis by 1.6% in the two years 2024-2025, mainly due to an increase in disposable income from rising wages and falling inflation. Public consumption will move in the opposite direction, with its growth rate at low levels in 2024 (0.7%) and at negative levels in 2025 (-2.5%). More important than private consumption, however, will be the contribution to growth of private investments. According to the programme, gross fixed capital formation is expected to increase by 9.1% in 2024 and by 14.4% in 2025 as a result of the absorption of Recovery and Resilience Facility funds, lower interest rates and the more favourable economic environment following Greece's recovery of the investment grade.
Thus, investment as a percentage of GDP is estimated to increase to 17% in 2025, from 14% in 2023, thus narrowing the gap with the Eurozone average (22% in 2023).
The fiscal forecasts
As far as the primary budget surplus is concerned, the programme predicts that this will stand at 2.1% of GDP in 2024 and 2025, while the general government deficit is forecast to measure 1.2% of GDP this year and 0.9% of GDP in 2025. Public debt is projected to narrow to 146.3% of GDP in 2025 from 152.7% of GDP in 2024 and 161.9% of GDP in 2023.