Greek economy faces inflation and energy crisis risks

Inflation and the energy crisis are challenging economic planning in Greece, as recent data suggests inflation rates are exceeding official projections. According to the Institute of Economic and Business Research (IOVE), the nine-month harmonized inflation rate reached 3.8%, surpassing the draft budget's full-year estimate of 3.6%. IOVE projects inflation will end the year at 4% and reach 3% by 2027, which is higher than the draft's forecasts of 3.6% and 2.4%, respectively.

The primary driver of this discrepancy is the volatility of international energy prices. While the draft budget relies on European Commission assumptions that Brent crude would drop to $78.2 per barrel by 2027, actual prices have remained high, recently exceeding $100 per barrel. Significant price increases have been noted in energy, housing, dining, tourism, and transportation.

Furthermore, the Greek economy faces constraints due to a lack of European fiscal flexibility. Recent EU summits have not reached a consensus on relaxing fiscal rules, limiting the ability to implement support measures for households facing rising fuel and electricity costs.