A game of musical chairs around the growth rate for Greece

by Antonis D. Papagiannidis

Greek Prime Minister Kyriakos Mitsotakis was the latest to join in the game of musical chairs orchestrated around the growth rate the Greek economy will be able to reach in 2021 and – even more importantly – in 2022. (In this game, whoever proves close to the growth rate that will be reached will get a chair; those who will have missed it, will be left standing. It goes without saying that – contrary to the earnestness of kids engaged in the game – when the actual rate will be computed for 2021, some nine months from now, most people will have forgotten what is forecast. But there is no serious talk over an economy without a growth forecast. So, here goes!).

The Mitsotakis forecast – in the recent Economist 25th Roundtable with the Greek Government – is for 4.3% for 2021, while the rate ‘will skyrocket” to 6% for 2022. Not to leave his own Government’s official forecast out in the cold -3.6% for 2021 and 6% for 2022, according to the Greek Budget figures, to which the Finance Minister Chr. Staikouras thinks safer to stick – Mitsotakis explained that this performance will be based on Greece bridging the investment gap that separates it from its EU partners, reaching 13% of GDP for 2021 and 15% for 2022. Moreover, Greece would be the first in exports performance  (with close to +8% “when the Eurozone countries’ [exports] will move around 0%”). The Staikouras forecast was called “within reach” by ESM managing director Klaus Regling.

Meanwhile, the EU Commission, in its spring/May forecasts for Greece, has 2021 growth at 4.3% while going to a (slightly upwards revised) 6.0% for 2022. The Bank of Greece stays at 4.2% for 2021, to increase to 5.3% in 2022. IOBE/The Foundation for Economic and Industrial Research was recently optimist enough to have a basic scenario for 2021 with a 5-5.5% growth rate, but also cautious enough to have an alternative scenario with 2,5-3% in case unpleasant shocks occur. Speaking of which, the tourist-dependent Greek economy has already started to face the reality of a spreading coronavirus variant “Delta”…

Coming back to Klaus Regling: he was careful enough to point at “risks remaining as a new variant of coronavirus could have a negative impact on tourism”, off-setting this comment with positive thoughts about the Recovery Fund projects to be financed in Greece, consisting in “reforms and investments”; he added – as might be expected – that “debt sustainability should be held in mind” and that “a more credible fiscal road” should be followed once the recovery stabilised. It is under such a constellation of conditions that debt sustainability would be met for Greece: such was the parting shot of Regling in the Economist event.

This is how the musical chairs over the growth rate for the Greek economy is going on and on.