Shocking Energy Costs, Ukraine War Aid Will Slow Greece’s Growth

ATHENS – After growth of 5.1 percent in 2022 during the waning COVID-19 pandemic, Greece’s economy is expected to expand just 1.1 percent in 2023 because of the effect of high energy costs that required state subsidies.

Those were driven by the effect of Russia’s ongoing invasion of Ukraine that has continued uncertainty about supply chains and other factors that have hurt spending and investments, the Organisation for Economic Co-Operation and Development (OECD) said, reported Reuters.

Greece in 2022 lifted health measures during the pandemic and benefited with a tourism rush that brought in some 18 billion euros ($19.35 billion) and helped the government provide more than 10 billion euros ($10.73 billion) in energy bill aid.

There was also stronger than expected interest by foreign investors but the unabated hike in energy costs, supply disruptions and renewed uncertainty, mainly from the war in Ukraine, are sharply slowing the recovery, it said.

“The war is directly affecting Greece’s energy supply and costs. Its indirect effects are compressing spending and delaying investment and hiring,” the OECD said, after inflation hit a 30-year high of 12 percent before receding somewhat.

Greece is expected to receive about 31 billion euros ($33.31 billion) in loans and subsidies from Europe’s recovery fund by 2026 to make its economy more digitalized and greener, the news agency said.

“The government’s energy support measures have delayed the return of the primary budget surplus to its medium-term target of 1.5 percent to 2 percent of GDP, weighing on Greece quickly achieving an investment grade rating,” the OECD said.

In joint statements with Greek Prime Minister Kyriakos Mitsotakis, the OECD’s Secretary General Mathias Cormann praised Greek reforms but said the country should keep reducing its high debt even more.

The ratio of debt to the Gross Domestic Product at the end of 2022 was “still very high,” at 175 percent, said Cormann, although Greece made early repayments of part of 326 billion euros ($350.28 billion) in three international bailouts.

“Greece must continue to pursue reductions in public debt ratios, while promoting a dynamic economy,” he added, the country likely to report a 2022 small primary surplus after three years of deficits.


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