The forecasts of most analysts regarding the course of the Greek economy for 2023 have gone through a series of successive stages. From an initial phase of relative optimism, when everyone predicted growth close to 3%, to a phase of strong pessimism after rising inflation and rising geopolitical uncertainty, when forecasts were narrowed to 0.5-1%, and finally to a reset of a relatively optimistic scenario 2 %-2.5%. Contrary to this practice, our own forecasts at Piraeus Bank remained stable throughout this period at the upper end of the most optimistic growth forecasts of around 3.5%. This prediction of ours is not connected with any “metaphysical” certainty that ultimately all events will turn out to be positive for the Greek economy. On the contrary, they are based on our assessment of the contribution of three factors that, in our opinion, will positively influence the course of the Greek economy. More specifically, I mean:

In the “statistical” factor. The very positive performance of the Greek economy in Q3 2022, with GDP (at constant 2015 prices) reaching a high of €48.7 billion, means that if GDP in each of the four quarters of 2023 remains stable at these levels (48.78 billion euros per quarter), then the annual change in GDP in 2022-2023 will rise to the level of 1.5%. In other words, this “statistical” property of calculating the rate of change in economic activity alone gives Greece a 1.5% increase in GDP.

In addition to statistics, we foresee the contribution of the second “passive” factor, which will contribute to the development of the Greek economy. This factor is related to our assessment that the very negative trade impact of 2022 will be reversed in 2023. The sharp rise in energy and food prices from late 2021 and throughout 2022 led the deficit in the external balance of the Greek economy (i.e. exports minus imports), which in turn reduced the GDP of the previous year by 2.5 percentage points. As energy prices slow and begin to return to their long-term levels, the negative impact of the terms of trade will soften, leading to a passive (that is, without our own intervention) mitigation of the external sector’s negative impact on GDP this year.

Last, but probably the most important factor is the “volatile” investment growth factor. With above-average capacity utilization and net investment (i.e. investment minus depreciation) in 2022 still at a negative level, this means that the demand in the Greek economy for new investment remains not only strong but necessary. At the same time, financing for these investments remains available both from the resources of the Recovery and Resilience Program and from all other European and national resources. However, despite the unprecedented need for investment, one should keep in mind the high volatility of this factor, as it is influenced by a significant number of variables, such as the economic and political climate, the international economic environment, the ECB’s monetary policy and, accordingly, the size of interest rates. .

In conclusion, we note that the GDP of the Greek economy this year will benefit both from statistical factors and from the elimination of the negative effects of 2022. However, the factor that ultimately determines the level of growth in 2023 will be the most volatile and most difficult to predict of all investments.

Mr. Ilias Lekkos is Head of Financial Analysis and Investment Strategy at Piraeus Bank.