A billboard with a picture of Iranian missiles has been spotted on a street in Tehran, Iran, sparking concerns about the growing tensions in the region. Meanwhile, Greece is facing its own set of challenges, including demographics, climate change, and a large investment gap with Europe. These problems continue to overshadow the country’s prospects as it struggles to keep pace with its major economies.
The weak growth of Europe’s major economies poses an additional challenge for Greece. The government’s forecast for growth of 2.9% this year seems ambitious as there is a real risk of new upward pressures on inflation. The external macroeconomic environment remains full of challenges, with increased security uncertainties and the possibility of an escalation of geopolitical tensions in regions like Ukraine and the Middle East.
Spyridoula Tzima, deputy vice president of the DBRS Morningstar rating agency, warns that an escalation of geopolitical tensions could lead to a rise in commodity prices and put upward pressure on prices. This could delay central banks’ decisions on interest rate cuts and require additional fiscal measures. Global challenges such as monetary policy tightening and domestic events like reduced agricultural activity due to severe flooding have already affected economic activity.
Maddalena Martini, a senior economist at Allianz, expects GDP growth to reach only 1% this year as weak global demand will create new challenges for growth in Greece. However, Oxford Economics economist Paolo Grignani is slightly more optimistic, estimating that growth in Greece could reach 1.7% this year despite weak eurozone growth. Despite these challenges, he believes that the Greek economy’s reliance on domestic demand for growth will help drive positive outcomes.