This better-than-expected start to the year lifts the growth outlook for the EU economy to 1.0% in 2023 (0.8% in the Winter interim Forecast) and 1.7% in 2024 (1.6% in the winter).
Upward revisions for the euro area are of a similar magnitude, with GDP growth now expected at 1.1% and 1.6% in 2023 and 2024 respectively. On the back of persisting core price pressures, inflation has also been revised upwards compared to the winter, to 5.8% in 2023 and 2.8% in 2024 in the euro area.
In particular for Greece
In particular for Greece, economic activity is expected to grow by 2.4% in 2023. The output expansion is supported by a resilient labour market and the implementation of the Recovery and Resilience Plan (RRP).
Head-line inflation averaged 9.3% in 2022 but is set to moderate to 2.4% by 2024 due to easing energy prices. While remaining negative, the general government balance deficit keeps shrinking on the back of improved revenue collection. Public debt is set to decline further.
Despite the energy crisis and associated inflationary pressures throughout the year, the Greek economy grew by 5.9% in 2022. Buoyant private consumption, significant investment activity, and the impetus provided by the rebound of tourism during the summer season contributed to the strong growth performance. Moreover, real GDP rose sizeably in the final quarter of 2022 despite widespread price pressures implying a significant carry-over effect for 2023.
Real GDP is forecast to expand by 2.4% this year on the back of both domestic and external demand. However, growth in private consumption is set to cool down significantly compared to the post-pandemic recovery last year, amid a loss in household real disposable income and a still negative savings rate.
The labour market
The labour market improved markedly in 2022 amid sustained job creation. Even as people continued to return to the labour market following the pandemic, implying a rising labour force, the unemployment rate fell to 12.5% and is set to decline to 11.8% by 2024. Despite the expected pick-up in nominal wage growth this year and next, real wage growth is not expected to turn positive before 2024.
The general government deficit in 2022 turned out significantly lower than expected
The general government deficit in 2022 turned out significantly lower than expected, reaching 2.3% of GDP compared to 4.1% of GDP forecast in autumn. The primary balance recorded a surplus of 0.1% of GDP. This improvement is primarily due to better-than-expected tax revenues, particularly from value-added tax and direct taxes.
The general government deficit is expected to decrease further to 0.6% of GDP in 2024, implying a primary surplus of 2.5%. The improvement of the fiscal balance is driven by the phasing out of the remaining energy-related measures by 2024. Despite the planned reform of the wage bill with an estimated fiscal impact of 0.2% of GDP for 2024, public spending is expected to remain overall muted thereby improving the balance.
