In the third quarter of the year, as expected due to the impact of tourism, ING expects the growth trajectory of the Greek economy to accelerate, covering the sluggish pace of the first quarter.
In this context, it expects GDP to grow by 1.5% this year, lower than the Greek government’s estimates, and by 2% in 2025, with inflation remaining at 2.7%, to fall to 1 .9% the following year.
ECB interest rate cut almost certain
On the path of monetary policy, ING expects that despite early signs of possible inflation in the eurozone, a rate cut at the ECB meeting in June still looks certain. But the road from there is anything but clear.
As he explains, any signs of inflation and also stronger economic activity will limit the ECB’s room for manoeuvre. That’s why he expects the ECB to cut interest rates this year by no more than 75 basis points.
The development of the Eurozone is on the way
According to ING, first-quarter growth in the Eurozone was surprisingly strong, but initial figures for the second quarter are mixed. The recovery has certainly begun, but its pace is likely to be moderate.
Also, the European Commission’s economic sentiment index was disappointing in April, with moderate activity in the services sector and weakening manufacturing output.
The PMI, although up in April, still shows the industry in contraction territory. It appears that the inventory correction has yet to run its course, but he expects excess inventories to be reduced sufficiently in the second half of the year to allow for more production growth.
The unemployment rate in the eurozone remained at a record low of 6.5% in March for the fifth month in a row. In this context, the tightness in the labor market seems to be decreasing somewhat. Job vacancies, while still high, are declining and the Employment Expectations Index is now also on a downward trend.
All of these indicators are still above historical levels, and unfavorable demographics likely rule out any significant increase in unemployment. Real wage growth will continue to support consumption in the coming quarters.
Inflation is still at levels that may allow the European Central Bank to start cutting interest rates in June.
SOURCE: ot.gr
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