From the second quarter of 2021, Greece’s GDP is growing at a faster rate compared to the European Union (EU-27) average.
As Bank Alfa points out, this fact shows durability of the Greek economy against external challenges – mainly, such as, among others, the energy crisis, inflationary pressures, the sharp increase in interest rates by the European Central Bank and geopolitical uncertainty.
At the same time, the relatively better performance of the Greek economy was accompanied by a trend change in growth mix, with the percentage of investments in GDP gradually increasing from 10.7% in 2019 to 13.9% in 2023. Economic activity in Greece continued to grow at a satisfactory pace during the first half of the year, with a 2.2% growth in the real GDP each year, achieving one of the highest growth rates among the EU-27 member states and well above the average (0.7%).
According to the forecasts contained in the Medium-Term Fiscal Structural Plan 2025-2028, real GDP is expected to grow by 2.2% in 2024 and 2.3% in 2025, with consumption and private investment as the driving forces.
Investment activity is expected to continue its upward trend in the coming years, further strengthening its contribution to GDP. The conditions are already in place, as, in the two years 2025-2026, a significant increase in the projected expenditure on public and private investment is expected through of the Recovery and Resilience Fund (TAA). In this way, it is ensured that a significant amount of community resources are channeled into the economy. In addition, the attractiveness of Greece as an investment destination is improving, which is reflected in the increase recorded by Foreign Direct Investments (FDI) in recent years. Helping to strengthen them further is a recovery, as early as 2023, to investment grade.
According to the forecasts included in the Medium-Term Plan, public investment expenditure is expected to increase, for the period 2023-2028. in Euro 90.6 billion, of which EUR 11.6 billion was realized in 2023. Public investment expenditure includes the Public Investment Budget (PDE, national and co-financed component) and TAA resources (grants and loan component).
For the PDE, the projected resources are 9.4 billion euros on average for the period 2024-2028, when they were around 6-6.5 billion euros in the previous decade from the co-financing part. As for the TAA, it is expected that it will exist in the two years 2025-2026 the greatest inflow of resources in the economy compared to previous years, equal to Euro 9.8 billion and Euro 11.6 billion respectively. In the year 2026, the disbursements in the grants section are expected to be completed. However, disbursements of the loan branch of the TAA are expected to continue in both years 2027-2028.
The above funds, together with the approximately EUR 40 billion from the NSRF 2021-2027 and the Common Agricultural Policy Strategic Plan for the five-year period 2023-2027, are expected to continue to mobilize private investment, which is essential for high growth to achieve. rates.
Over the past five years (with the exception of 2020), there has been a significant increase in FDI, with investments to establish new businesses (new investment) accounting for more than 35% of total FDI. However, this percentage greatly lacking of the EU-27 average. The increase in new investments shows an improvement in the qualitative composition of investments, since it has multiplier benefits for the economy, as a large percentage is focused on activities with high added value.
The prospects for attracting more FDI appear to be positive. According to a recent survey carried out by EY on the attractiveness of the country as an investment destination, aimed at executives of foreign companies, their increased intention to invest in Greece is recorded, since one respondent out of every two that it intends to develop or expand its activities in Greece, during the next year, from 30% in 2019. The improvement of the index comes from both the companies based in Greece and the companies that do not have a presence.
Among the results of the research, it is noted the satisfactory image presented by our country in four of the five criteria for making investment decisions – with the exception of taxation – evaluated by the research participants (sustainable development, electricity, technology and human resources. ).
However, Greece’s 19th place in the question of which European countries will be the most attractive for foreign investment in 2024 shows the level of competition and the need to further improve the business environment.
At the moment, the geopolitical factor may be the main source of risks for the amount of investment initiatives and, in general, for the development prospects. The tension between Israel and Iran adds another flash point of instability to the Middle East region, increasing significantly. geopolitical risks.
Although the assessment of the development of this conflict is uncertain, Iran’s important role as an oil-producing country raises concerns about an increase in the price of oil in the event that Iran’s oil facilities are affected. Inflationary pressures could emerge, whether due to rising oil prices or even disruptions to trade flows through the Red Sea. delay the easing of monetary policy.