Commission Sees Growth for Greece Stable at 2.3% in 2024

European Commissioner for Economy Paolo Gentiloni, Photo source: European Commission

The Greek economy will continue to grow at a steady pace in 2024 on the back of 2.2 percent growth in 2023, said the European Commission in its Winter 2024 Economic Forecast released this week.

More specifically, Greece’s real GDP grew by 2.2 percent last year following a strong recovery in 2022 despite inflationary pressures. The Commission attributes the positive performance to investment and construction activity and to the implementation of the country’s Recovery and Resilience Plan (RRP).

The Commission approved Greece’s revised 35.95-billion-euro resilience plan “Greece 2.0” last November paving the way for the implementation of 76 reforms and 103 key investments many of which in tourism.

According to the report, economic growth is expected to remain “broadly stable” at 2.3 percent in 2024 and 2025.

Source: European Commission

Commission analysts expect investment activity to pick up “sizably” as the RRP implementation picks up pace and financing conditions ease. Real consumption is seen as expanding close to 2023 levels.

On the downside, increasing investments are expected to lead to higher import demand for goods and services, which is projected to reduce the positive contribution of net exports in 2024-25.

Underlying inflation excluding energy and food prices stood at 5.3 percent in 2023. Meanwhile, the tightening labor market combined with the recently announced minimum wage increase (as of April 2024) are expected to put some upward pressure on prices.

Harmonized Index of Consumer Prices (HICP) inflation is expected to decline more gradually in 2024 and 2025, to 2.7 percent and 2 percent, respectively.

Overall, in the EU, after fears of a technical recession in the second half of last year, the economy enters 2024 on weaker footing than expected with the Commission revising growth downward in both the EU and the euro area to 0.5 percent in 2023 from 0.6 percent projected in the Autumn Forecast, and to 0.9 percent (from 1.3 percent) in the EU, and 0.8 percent (from 1.2 percent) in the euro area in 2024.

In 2025, economic activity is still expected to expand by 1.7 percent in the EU and 1.5 percent in the euro area.

HICP inflation in the EU is forecast to drop from 6.3 percent in 2023 to 3.0 percent in 2024 and 2.5 percent in 2025. In the euro area, it is expected to decelerate from 5.4 percent in 2023 to 2.7 percent in 2024 and to 2.2 percent in 2025.

Source: European Commission

Growth is expected to regain traction in 2024. In 2023, growth was held back by the erosion of household purchasing power, strong monetary tightening, the partial withdrawal of fiscal support and falling external demand.

However, economic activity is still expected to accelerate gradually this year with the growth rate set to stabilize starting in the second half of 2024 until the end of 2025.