People walk in front of the Bank of Greece in central Athens, Greece on April 12, 2024. [Louisa Gouliamaki/Reuters]
In a monetary policy report published on Wednesday, Bank of Greece Governor Yannis Stournaras proposed limiting wage increases and increases in the prices of goods and services to levels compatible with the medium-term inflation target, strengthening monitoring to ensure compliance with competition rules and imposing sanctions if necessary, and finally removing all kinds of obstacles to competition.
The Bank of Greece has been closely studying the inflation issue recently, stating that it is a major concern, in part because many products in Greek supermarkets are more expensive than abroad. It also predicts that service inflation will become more persistent in the future as wages are expected to rise. However, Stournaras also touched on other issues in the Greek economy, including the production model and long-term sustainability of the economy, structural problems in the labor market, increasing household savings, ensuring access to housing on acceptable terms for citizens, a large investment gap, and low structural competitiveness.
He also lowered his growth forecast for this year to 2.2%, then raised it to 2.5% in 2025 before slowing to 2.3% in 2026.
The BoG reiterates its warning of significant risks to the economic outlook arising from disbursement delays linked to the resources of the Recovery Fund, stressing that this could affect investment and therefore growth, limiting fiscal stimulus. Examining the period 2021-2023, it even points out that in Greece, the contribution of total investment to economic growth was 2.2 percentage points lower than initially expected, due to significant underspending.
Finally, by stating that there is “high uncertainty about the future development of food inflation”, the Central Bank is not only acknowledging major concerns about the development of food prices, but also expects prices to remain essentially at high levels despite the declines in recent months.