The Greek economy continued to grow at a satisfactory pace in the second quarter of 2024, with a slightly stronger pace compared to the first quarter, the Bank of Greece said in its "Note on the Greek economy".

As it points out, this is due to the increase in private consumption and gross fixed capital formation. For inflation, it forecasts a further slowdown to 3% in 2024.

Specifically, economic activity continued to expand at a satisfactory pace in the second quarter of 2024, 2.3% year-on-year, outperforming the euro area average. Inflation based on the Harmonised Index of Consumer Prices (HICP) declined rapidly from its 2022 peaks due to falling energy prices in 2023 but remains relatively elevated at 3.0% in 2024:8M due to persistent increases in service prices.

In the housing market, apartment prices continued to rise at an accelerating pace in 2023, with growth rates slowing somewhat in the first half of 2024.

Market developments remained positive, with employment increasing and unemployment falling into single digits. The current account deficit narrowed significantly in 2023 but deteriorated in the first seven months of 2024 (by €1.3 billion year-on-year).

The primary fiscal outcome in 2023 showed a surplus of 1.9% of GDP, significantly higher than the 1.1%
target, due to higher tax revenues as well as lower primary expenditure. The debt-to-GDP ratio declined by 10.8 percentage points compared to 2022 to 161.9 percent of GDP due to economic growth and higher inflation. After moderating significantly during 2023, bank credit growth to businesses rebounded strongly.

DEPOSITS

Deposit growth slowed in 2023-2024 under the negative impact of high inflation and the substitution of deposits by other savings options. Having risen significantly since the second half of 2022, bank lending rates remain high. Because Greece's investment grade credit rating upgrade lessened the impact of higher interest rates, government bond yields and spreads have decreased.

GROWTH 

According to the BoG, growth is expected to accelerate marginally in 2024 and 2025, mainly due to investment, supported by available European resources and private consumption. Inflation is expected to decelerate further to 3.0% in 2024 due to a further decline in the inflation rates of food, non-energy industrial goods and services. The fiscal stance in 2024 is expected to be slightly expansionary due to increased investment spending financed by the Recovery Fund.

More specifically for 2024, the BoG reports that private consumption will grow by an average of 1.9%, investment is expected to continue to grow at a high rate, averaging 8.5% per annum, while unemployment is estimated to reach 10.4% in 2024 while continuing to decelerate rapidly to 8.7% in 2026.

RISKS

The worsening geopolitical crisis in Ukraine and the Middle East poses a significant downside risk to growth prospects as it increases uncertainty and puts upward pressure on energy prices.