Greek inflation rate dropped to 3.1%, economy expected to grow by 2.3% in 2024 and 2025

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The Greek annual inflation rate slowed to 3.1% in January from 3.5% in December 2023 and 7% in January 2023, Hellenic Statistical Authority said on Thursday.

The statistics service attributed this development to a decline in energy prices and more particularly a 60.2% drop in natural gas prices. On the other hand, however, price increases continued on food items (8.3%), led by price rises in olive oil (67.4%), fruit (14.2%) and vegetables (14.4%).

Prices rose 2% in bread-cereal, 6% in meat, 7.7% in fish, 0.9% in dairy-eggs, 67.4% in olive oil, 14.2% in fruit, 14.4% in vegetables, 6% in chocolate-sweets, 5% in coffee-cocoa, 11.7% in mineral water-juices and 6% in alcohol. Clothing-footwear rose 3.5%, housing rent was up 3.6%, heating oil rose 1.3%, pharmaceuticals 12.7%, 5.3% in medical services, 0.9% in hospitals, 4.6% in used cars, 11.5% in air travel, 3.1% in durable goods, 7.9% in cinemas-theatres, 9.3% in holiday packages, 4.0% in education, 6.8% in restaurants and 14% in health insurance contracts.

On the other hand, prices fell in natural gas (60.2%), fuel-lubricants (3.8%), electricity (0.4%), telephone services (2.5%), audio-visual equipment (1.7%) and other personal care products (1.2%).

The statistics service attributed the 3.1% increase in the consumer price index in January to an 8.35 increase in food/beverages, a 2.65% increase in alcohol/tobacco, a 3.5% increase in clothing/footwear, a 1.9% rise in durable goods, a 5.7% rise in health, a 0.2% increase in transport, a 2.6% increase in entertainment, a 3.5% increase in education, a 6.4% rise in hospitality, an 1.7% rise in durable goods. The housing index fell 2.7% and commucations fell 2.2% in January.

The consumer price index eased 0.8% in January from December 2023, while the harmonised inflation rate was 3.2% in January compared with the same month in 2023, while it fell 0.9% in January on a monthly basis.

Meanwhile, Greek economic growth is expected to remain strong both this year and in 2025, staying above the EU and Eurozone averages, the European Commission said in its winter economic forecast for Greece released on Thursday.

More specifically, the Commission forecast a stable growth rate of 2.3% in 2024 and 2025, slightly lower than in the Autumn Forecast (2.4%) for 2024 and slightly up from November's forecasts for 2025 (2.2%).

Following the strong recovery in 2022, consumption growth decreased substantially but remained one of the main growth drivers last year, the EU's executive said in a report.

"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," the Commission said.

"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."

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