The Russian invasion of Ukraine has altered economic conditions, weakening short-term growth prospects. The energy crisis is compounding inflationary pressures, while uncertainty about the duration of the war and its impact on the real economy is acting as a deterrent to economic decisions on the part of businesses and households amid rising production costs and falling disposable income, respectively.
Nonetheless, the Russian invasion of Ukraine has altered economic conditions, weakening shortterm growth prospects. Inflationary pressures mainly fuelled by the energy crisis, compounded
by the uncertainty surrounding the duration of the war and its impact on the real economy, are
acting as a deterrent to economic decisions on the part of businesses and households.
The Greek economy is expected to continue to grow in 2022, albeit at a slower pace. Heightened economic uncertainty, on the back of a high and persistent inflation as well as Russia’s invasion of Ukraine, is denting the expectations of economic agents and negatively affecting their decisions.
Consumption, investment and exports will continue to have a positive contribution, although the adverse impact of inflation on real household disposable income will contain private
consumption growth. Rising production costs and lower consumption may negatively impact
business profitability and, amid generalised uncertainty, lead to a postponement or even cancellation of investment decisions.
On the upside, the use of the European recovery instrument “Next Generation EU” (NGEU) in
2022 is expected to provide funding for major investment projects and structural reforms, thus
positively contributing to sustained economic growth.
According to provisional data from ELSTAT, gross disposable income rose from 118.7 billion euros in 2020 to 125.6 billion euros in 2021, an increase of 5.8%. It is noted that household income was boosted by fiscal measures to address the pandemic, totaling about 2 billion euros for 2021, which also helped protect employment and reduce unemployment.
On the other hand, the growth rate of apartment prices accelerated in 2021 to 7.1% on an annual basis, compared to 4.5% in 2020. In fact, in the second quarter of 2021, apartment prices for the whole country increased by 9.1% compared to the corresponding quarter of 2020. For 2021, the highest annual price growth rate is presented by the newly built apartments compared to the old ones, where increases of 7.4% and 6.9% were recorded, respectively. The analysis of the data by geographical area shows that the largest increase was recorded, for the whole of 2021, in Athens (9.1%).
According to the BoG, despite the instability of the last two years, as a result of the pandemic and the recent increase in energy costs, construction costs and the effects of the war in Ukraine, the prospects for further price increases for the Greek real estate market remain positive. On the one hand, the emerging very good course of tourism and on the other hand, the prospect of alleviating geopolitical instability in a reasonable period of time, maintain the positive medium-term and long-term expectations. Although the European Commission's recommendation to restrict residence permits for investors (gold visa or gold passport) may have a partial effect on demand, it is estimated that investment interest will remain strong, especially for certain privileged positions in the basin. Attica and in areas with tourist characteristics.
It is been pointed out that prices are still significantly different from the historical high recorded before the financial crisis. Based on the apartment price index compiled by the Bank of Greece for the whole country, the highest price of the index was observed in 2008 (101.7) and then followed a steady downward trend, to record the lowest price in 2017 ( 59). Since then, the apartment price index has been steadily rising, reaching 72.1 in 2021.
