Six months ago, at the peak of the Global Geopolitical crisis, with inflation hovering at double digit level and uncertainty regarding the adequacy of energy supply, everybody was busy downgrading their forecasts regarding the growth dynamics of the EU and Greece. Going against the current, we preferred to keep our nerves and avoid joining the doom and gloom consensus. So, we kept our 2023 GDP forecast for the Greek economy at 3.6% on the back of 3 distinct economic drivers:
(a) We call the first factor “statistical” given that it relates to growth linked to the so-called “carry-over” effect. In brief, the essence of the carry-over effect is linked to the idea that given the strong momentum of the Greek economy at the end of 2022, even if Real GDP in all 4 quarters of 2023 remained stable at €48.7bn (that is at its Q4-2022 levels) full year 2023 GDP would register a 1.5% growth rate. So, the statistical properties of GDP growth arithmetic adds a 1.5% to Greek GDP growth rate in 2023.
(b) Growth will also be supported in a “passive” manner from the reversal of the negative terms-of-trade shock that hit the Greek and the European economy in 2022. In Greece alone, the spike in international energy and food prices widened the current account deficit and subtracted almost 2.5% of GDP growth. A partial reversal of this negative impact in 2023 as prices passively return to their long-term levels could easily provide a positive boost to GDP growth.
(c) Finally, we have economic growth that we expect to come from the recovery of investments. Increased capacity utilization and still negative “net fixed capital” formation point towards an urgent need for increased investment in the Greek economy. These investment projects could still be financed with preferential terms from the RRF. Still investments can be a rather unreliable and “risky” growth driver given at it is highly volatile and depends upon a number of parameters such as the economic sentiment, the stage of the business cycle, the level of interest rates, the extend of political uncertainty etc.