Economy to grow by 2.5 pct in 2018 and 2019, European Commission report

The Greek economy is expected to grow by 2.5 pct this year and in 2019, the European Commission said in its economic outlook estimates for the 2017-2018 period, released here on Wednesday.

The report, titled “The Greek economy grows again”, said that economic recovery was expected to strengthen in the coming years and to support an increase in employment. However, it noted that “a steady commitment for structural reforms is of vital importance for the continuation of growth”.

“It is the first time since 2008 that the Greek economy is growing for three successive quarters,” the Commission report said, noting that real GDP in Greece grew by 0.3 pct in the third quarter of 2017, for an annual growth rate of 1.1 pct for the first three quarters of 2017. The Commission estimates that net exports were the driving force of recovery in the second and third quarter of 2017, as Greece has begun benefiting from a wider recovery in Europe and an improvement in its competitiveness, achieved through structural reforms.

The report noted that an increase in private consumption was generally stable in the first three quarters of 2017, slightly reducing a savings gap. However, investments fell, combined “with the adverse consequences of a delay in completing a second review of the ESM programme”.

Real GDP is projected to grow by 2.5 pct in 2018 and 2019.

A steady improvement in the labour market and of consumer climate is expected to contribute to an increase in private consumption. The European Commission estimates that the business climate in Greece will improve further in 2018, leading to a moderate growth of investments, while financial conditions are expected to gradually return to normality. “A strong external demand is expected to offer a boost to net exports, which are expected to become a significant growth tool in 2018 and to support the re-orientation of the economy towards the commerce sector,” the report said.

The labour market continues improving, with the unemployment rate falling to 20.7 pct of the workforce in October 2017, down 2.7 percentage points from the end of 2016. This improvement is a result of an increase in employment, up 1.8 pct (on annual basis) in the first three quarters of 2017 and it is expected to continue rising in relation with economic recovery.

Greek annual inflation rose to 1.1 pct in 2017, reflecting price increases in energy and a rise in indirect taxation. The inflation rate is expected to ease in 2018 as the core inflation seems unlikely to fully counterbalance weakened basic results related with the energy sector.