Greece’s real GDP is estimated to have grown by 2.2% in 2023, slightly lower than in the Autumn Forecast. Following the strong recovery in 2022, consumption growth decreased substantially but remained one of the main growth drivers last year. Despite tightening financing conditions, investment made a significant contribution, thanks to strong construction activity and the implementation of the Recovery and Resilience Plan (RRP). The slower than expected recovery of Greece’s key EU trade partners weighed on export growth, still net exports had a positive contribution to growth.

Economic growth is expected to remain broadly stable at 2.3% in 2024 and 2025, broadly as expected in autumn. Real consumption is set to expand at similar rates as in 2023, resulting in a slightly lower contribution to real GDP growth. Investment is expected to pick up sizeably as the RRP implementation gains speed, and as financing conditions ease. The composition of gross fixed capital formation is projected to shift from construction to more productive investments such as equipment and machinery. However, investments are likely to induce higher import demand for both goods and services, which is projected to reduce the positive contribution of net exports in 2024-25.

Annual HICP inflation moderated to 4.2% in 2023. Underlying inflation excluding energy and food prices was substantially higher, at 5.3% in 2023 on average, but declined below the level of HICP inflation by December 2023. This reflects a progressive moderation of demand pressures on core prices and lower-than-expected pass-through of previous energy and food price shocks. The tightening labour market, together with the recently announced minimum wage increase (as from April 2024), is expected to put some upward pressure on prices, which would partly offset the impact of lower energy prices on inflation. Overall, HICP inflation is expected to decline more gradually in 2024 and 2025, to 2.7% and 2% respectively. This is marginally lower than in the Autumn Forecast in both years.