In Tehran, Iran, an anti-Israel billboard featuring an image of Iranian missiles has been spotted on a 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 cloud the outlook for the Greek economy while intensifying external geopolitical tensions add a new layer of uncertainty.
The weak growth of major European economies, which Greece relies on for investments, exports and tourism, represents an additional challenge. The government’s growth forecast of 2.9% this year seems ambitious given the external macroeconomic environment remains challenging with heightened security uncertainty and the possibility of escalating geopolitical tensions in regions such as Ukraine and the Middle East.
Spiridula Cima, deputy vice president of rating agency DBRS Morningstar, notes that the escalation of geopolitical tensions could lead to an increase in commodity prices and put upward pressure on prices. This could delay decisions by central banks to cut interest rates and require additional fiscal measures. Global challenges such as tightening monetary policy and domestic events such as reduced agricultural activity due to heavy flooding have already affected economic activity.
Madalena Martini, senior economist at Allianz, warns that weak global demand will create new challenges for growth in Greece this year. It expects GDP growth to reach just 1% as the country is affected by a slowdown in its biggest export markets. However, Paolo Grignani, an economist from Oxford Economics, is somewhat more optimistic, estimating that growth in Greece could reach 1.7 percent this year despite weak growth in the Eurozone he believes that the Greek economy’s reliance on domestic demand for growth will help achieve positive results.
Overall, these challenges continue to cloud Greece’s outlook while intensifying external geopolitical tensions add a new layer of uncertainty.