Greece’s Economic Challenges: Navigating Through Weak Global Demand and Domestic Uncertainty
Amidst the global economic challenges, an anti-Israel billboard with a picture of Iranian missiles was spotted on a street in Tehran, Iran. This occurs as Greece faces its own set of domestic challenges such as demographics, climate change, and a large investment gap with Europe. The strengthening of external geopolitical tensions adds to the uncertainty surrounding Greece’s prospects.
Europe’s major economies, which Greece relies on for investment, exports, and tourism, are experiencing weak growth. There is also a real risk of new upward pressures on inflation, challenging the government’s forecast for growth of 2.9% this year. Revised forecasts near 2.5% seem overly ambitious in this current economic climate.
The external macroeconomic environment is rife with challenges and increased security uncertainties. Spyridoula Tzima, deputy vice president of the DBRS Morningstar rating agency, notes the risk of escalation in geopolitical tensions like in Ukraine and the Middle East. This could lead to a rise in commodity prices and put further upward pressure on prices, potentially delaying central banks’ decisions on interest rate cuts and requiring additional fiscal measures.
Global challenges like monetary policy tightening and geopolitical tensions, along with domestic events like reduced agricultural activity due to severe flooding, have already impacted economic activity. Weak global demand is expected to create new challenges for growth in Greece this year, with GDP growth estimated to reach 1%. The slowdown in destination markets for Greek exports, particularly in services like tourism, exacerbates the country’s economic challenges.
Despite these obstacles, Oxford Economics economist Paolo Grignani remains slightly optimistic about Greece’s prospects this year. He estimates that growth will reach 1.7%, citing the resilience of domestic demand in Greece particularly in consumption and investments as a potential driver of growth despite weak eurozone growth being likely to have a negative impact on it
