National Bank sees limited impact in the fourth quarter GDP from the catastrophic flood caused by the Daniel Storm, whereas reconstruction projects will boost growth in 2024-25. 

“Increased inflation at an economy-wide level combined with flood-related production losses leading to a slowing in GDP growth to 1.6% y-o-y in Q4:2023 (versus a pre-Daniel estimate of 2.3%), following robust GDP growth in Q2 of 2.7% y-o-y and estimate of 3.4% in Q3, underpinned by buoyant tourism, resilient private consumption, and solid fixed capital investment spending,” NBG said in a research note. 

The above trends suggest FY:2023 growth of at least 2.4% y-o-y and slightly higher than the latest official forecasts for Greece (estimates at c. 2.2-2.3% y-o-y), once the production drag from the flood and higher inflation are included into fourth quarter growth estimates. 

A net boost to GDP growth of 0.3 pp, on average, is expected in 2024-25 from higher public and private investment in restoration, water management and anti-flood projects, as well as spending for the replacement of capital equipment and consumer durables, leading GDP growth to 2.7% and 2.3% respectively in 2024 and 2025. 

The major part of the reconstruction bill will be covered by the public sector, with the support of EU funding as well as by insurance recoveries and private sector donations. EU support to Greece is expected to exceed €2.5 bn while insurance recoveries are estimated to be in the range of €0.5-0.7 bn, implying that the net fiscal cost of reconstruction will be limited in the medium term.