Economy of Greece faces a caller blow: against the backdrop of the Gulf situation and rising vigor prices Bank of Greeceand revised the forecasts, fixing slower maturation and accrued inflationary pressure.
According to the yearly study presented by the caput of the Bank of Greece Yiannis Sturasarasthe country’s economical dynamics successful 2026 are deteriorating.
GDP maturation revised to 1.9% against 2.1% a year earlier, while inflation, alternatively of the expected decline, will emergence to 3.1%.
Energy daze brings backmost aged risks
The situation successful the Middle East is really launching a caller circular of vigor pressure.
After closing Strait of Hormuz World lipid prices person risen sharply:
- oil terms maturation exceeds 40%;
- Brent mean yearly maturation successful 2026 is estimated astatine 18%;
- in stress scenarios – up to 22%.
This creates a classical hazard stagflation* — a operation of economical slowdown and rising prices.
Three blows to the economy
The mechanics of the interaction of the vigor situation connected Greece is processing done respective channels astatine once:
- Population income: rising vigor prices trim existent purchasing powerfulness and bounds consumption.
- Business: An summation successful accumulation costs leads to higher prices and decreased competitiveness.
- Foreign trade: Rising prices for vigor imports worsen the trade balance.
It is the overseas trade shortage that remains 1 of the main vulnerabilities of the Greek economy.
What the models show
According to calculations by the Bank of Greece, with an summation successful lipid prices by 22%:
- inflation increases by astir 0.4 percent points;
- economic maturation slows down by 0.1 points of GDP;
- the antagonistic effect intensifies successful subsequent years.
The main mechanics is simply a alteration successful existent income and an summation successful concern costs, which simultaneously hits some request and investment.
Domino effect
Additional unit is created by the planetary factor:
- slowdown successful the economies of trading partners;
- rising planetary ostentation pressure;
- decline successful request for Greek exports.
As a effect the system finds itself sandwiched betwixt interior terms increases and outer request declines.
Editorial comment
The main occupation is not successful the numbers, but successful the structure.
The Greek system remains babelike connected outer factors – particularly vigor and imports. This means that immoderate planetary situation automatically turns into an interior one.
Growth astatine 1.9% successful such conditions is not development, but an effort to stay afloat.
At the aforesaid time, ostentation supra 3% really eats up this growth, leaving the colonisation with the feeling that the system is “growing” lone connected paper.
The astir alarming awesome is the instrumentality of the hazard of stagflation. This is simply a script successful which the authorities loses the quality to simultaneously stimulate maturation and power prices.
And if the existent dynamics continue, the question will nary longer beryllium astir maturation rates, but astir how agelong tin the system withstand outer shocks without superior interior consequences?.
*Help: what is stagflation
Stagflation is an economical improvement successful which slow economical maturation and precocious ostentation are simultaneously observed.
The term is derived from English words stagnation (stagnation) and inflation (inflation).
Why is it dangerous
In a mean situation, the system develops according to 1 of two scenarios:
- growth is accompanied by mean inflation;
- recession—a alteration successful terms pressure.
Stagflation breaks this logic: prices rise, but the system does not develop.
This makes economical argumentation peculiarly challenging, arsenic measures to curb ostentation could further slow growth.
Historical example
A classical illustration of stagflation is the play of the 1970s associated with the lipid crisis, when a crisp summation successful vigor prices led to a simultaneous acceleration of ostentation and a slowdown successful the economies of Western countries.
Main reasons
- rising vigor prices;
- external economical shocks;
- disruption of supply chains;
- structural weaknesses of the economy.
Why is it hard to overcome
The occupation with stagflation lies successful the contradiction of measures:
- the combat against ostentation (raising rates) slows down the economy;
- stimulating maturation increases inflationary pressure.
As a result, the system finds itself successful a situation where immoderate determination has antagonistic broadside effects.
Under existent conditions
Rising vigor prices and slowing economical enactment make the hazard of a stagflationary scenario, successful which existent incomes of the colonisation alteration and unit connected concern increases.
Simply put: stagflation is simply a situation where everything becomes much expensive, but the system does not grow.
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