Economic Growth in Greece

Greece’s central bank has released its latest Monetary Policy Report, which forecasts the country’s economic growth to be 2.3% in 2025. This prediction is significant, as it indicates a positive trend for the country’s economy.

Forecasted Growth Rates

The report also provides growth forecasts for the subsequent years. Economic expansion is expected to decline by 0.5% to 2% in 2026 before picking up marginally to 2.1% in 2027. Notably, these growth rates are projected to exceed the euro area average, which will support a gradual convergence of Greece’s real per capita GDP toward the EU mean.

Drivers of Economic Growth

The main drivers of Greece’s GDP growth are expected to be domestic consumer spending, investments, and exports. This is a positive sign, as it indicates that the country’s economy is diversifying and becoming less reliant on external factors. The direct impact of newly imposed tariffs on Greece’s GDP is anticipated to be limited, given that the U.S. represents less than 5% of Greece’s total goods exports in 2024 and is not a major trading partner.

Potential Risks

However, there are potential risks that could impact Greece’s economy. The primary risks are likely to be indirect, mainly through a potential decline in external demand from the eurozone and a broader rise in economic uncertainty. This highlights the importance of Greece’s economy being resilient and adaptable to changing global conditions.

Inflation Projections

Inflation, as measured by the Harmonized Index of Consumer Prices (HICP), is expected to continue easing over the next three years. In 2025, inflation is projected to stand at 2.5%, reflecting persistent price pressures in the services sector. This resilience is primarily attributed to expected increases in wages and rents, as well as continued strong demand driven by tourism.

Fiscal Turnaround

In 2024, Greece recorded a fiscal turnaround for the first time since 2019, with the general government balance shifting from a deficit of 1.4% of GDP in 2023 to a surplus of 1.3% of GDP. The primary balance of the general government reached a surplus of 4.8% of GDP, significantly exceeding the forecast set out in the state budget. This is a significant achievement and demonstrates the country’s commitment to improving its fiscal position.

Conclusion

In conclusion, Greece’s economic growth is projected to be positive in the coming years, driven by domestic consumer spending, investments, and exports. While there are potential risks, the country’s economy is expected to remain resilient. The easing of inflation and the fiscal turnaround are also positive signs, indicating that Greece is on the path to economic recovery and stability. Overall, the outlook for Greece’s economy is promising, and the country is expected to continue making progress in the coming years.