UniCredit has upgraded its forecasts for the Greek economy, predicting growth of 2.3% this year from 1.9% previously, while for 2025 it continues to expect growth of 1.7%.

UniCredit attributed the positive GDP surprise in Q2 to accelerating industrial activity amid healthy domestic and external demand. A development that translated into strong inventory accumulation and a significant acceleration in imports, on which industrial production is largely dependent.

TOURISM AND CUSTOMS

The bank notes that growth likely slowed in the summer as reduced demand for Greek manufacturing products began to lead to lower production levels. It also estimates that the services sector also weakened but remained at decent levels due to the resilience of tourism-related sectors. Healthy growth in domestic demand is expected to partly offset the negative contribution from exports.

RECOVERY FUND AND FDI 

Investment is expected to receive further support from Recovery Fund allocations and foreign direct investment, while private consumption is expected to benefit from strong real disposable income growth as inflation slows more than nominal wage growth. In particular, UniCredit expects price growth to slow again in the coming months, with prices of energy, food and industrial goods normalising. It adds that sluggish demand is expected to make it more difficult to pass on the increased costs of intermediate goods and transport to final consumers. The house sees inflation at 2.6% this year and 1.8% in 2025.

DEBT

UniCredit notes that the 2025 budget will target a stabilisation of the primary surplus at around 2% of GDP, confirming the government's willingness to stick to a neutral fiscal policy next year. The recent announcement of a €1 billion (0.5% of GDP) package of measures to relieve low-income households and support employment was evidence that the government is prepared to take advantage of progress on the primary surplus front for distributive fiscal policies, as the house noted. While this package risks widening the fiscal deficit if growth turns out to be lower than forecast, UniCredit predicts that the government will take corrective measures to avoid any budget slippage if necessary. In any case, Unicredit expects a significant further reduction in debt, to 153.1% in 2024 and 146.8% in 2025.