IMF Predicts Greece’s Economy to Expand by 2.5% This Year; Growth to Slow Down in 2023

According to the International Monetary Fund (IMF), Greece’s economy is expected to grow by 2.5% this year, driven by strong domestic demand, investments, and European Union funds. However, growth is predicted to slow down to 2% next year. The IMF’s estimate for 2023 is higher than that of the Greek government, which expects growth of 2.3%.

The IMF stated that economic activity in Greece remained strong in the first half of the year, despite natural disasters like wildfires and a destructive rainstorm. High-frequency data suggests that overall economic momentum remained robust in the third quarter.

The wildfires and rainstorm caused significant damage in Greece’s Thessaly region, with an estimated cost of over 1 billion euros. However, Greece is expected to benefit from investments due to the influx of over 55 billion euros in EU structural and recovery funds it will receive in the coming years.

The IMF cautioned that Greece may face challenges in the medium term. Demographic headwinds, the expiration of Next Generation EU funding in 2026, and low potential growth are factors that could contribute to a moderation of GDP growth to around 1.25% in the medium term.

During its debt crisis, Greece required three international bailouts totaling over 260 billion euros. However, after successfully exiting the bailouts in 2018, the country has relied solely on bond markets to cover its borrowing needs. Greece managed to repay the IMF, which had provided it with 28 billion euros of financial assistance between 2010 and 2014.