In Tehran, Iran, an anti-Israel billboard with a picture of Iranian missiles has been spotted on the street. Meanwhile, in Greece, storm clouds are gathering over its economy as it faces domestic challenges such as demographics, climate change, and a large investment gap with Europe. These challenges continue to overshadow its prospects while external geopolitical tensions add a new layer of uncertainty.
The weak growth of Europe’s major economies poses an additional challenge for Greece, which relies on them for investment, exports, and tourism. There is a real risk of new upward pressures on inflation, making the government’s forecast for growth of 2.9% this year seem ambitious. The external macroeconomic environment remains full of challenges due to increased security uncertainties and the possibility of an escalation of geopolitical tensions in regions like Ukraine and the Middle East.
Spyridoula Tzima, deputy vice president of the DBRS Morningstar rating agency, warns that an escalation of geopolitical tensions could lead to a rise in commodity prices and put upward pressure on prices. This could delay central banks’ decisions on interest rate cuts and require additional fiscal measures. Global challenges such as monetary policy tightening and domestic events like reduced agricultural activity due to severe flooding have already affected economic activity.
Maddalena Martini, a senior economist at Allianz, predicts that weak global demand will create new challenges for growth in Greece this year. She expects GDP growth to reach only 1%, as the country has been impacted by a slowdown in its top export markets. However, Oxford Economics economist Paolo Grignani is slightly more optimistic and believes that growth in Greece could reach 1.7% this year despite weak eurozone growth. He argues that the Greek economy’s reliance on domestic demand for growth will help drive positive outcomes.