WOOD Flash – Greece macro: still on a promising growth trajectory

The latest data suggest that economic activity has likely weakened further in 2Q, after moderating in 1Q. However, activity is gathering momentum again in 3Q, on the back of rising real wage growth, corroborated by positive business surveys. We have revised down our real GDP forecasts to 2.8% and 3.5% for this year and the next (down from 3.5% and 4.2%), and we expect growth to reach 4% in 2025E. Despite the revision, we remain more constructive than the Bloomberg consensus (1.8% and 1.6% in 2023-24E), but flag that our forecasts remain subject to risks in both directions. Downside risks include any further aggravation of the Russia-Ukraine war, a higher and tighter monetary stance for longer from the Fed and the ECB, and any possible disruptions from the wildfires at the peak of the tourism season. Meanwhile, real wage growth is recovering as a trend almost everywhere, presenting the key upside risk against the backdrop of tight labour markets. Inflation is remain to likely turn back to the 2% target later next year, but then slide further in 2025E, in our view.