War-driven costs weigh on Greek economy

Rising costs and weakening request are tightening unit connected Greece’s system arsenic the interaction of the war successful the Middle East deepens, with manufacturing and tourism showing expanding signs of strain and policymakers warning of broader risks.

In the concern sector, the latest information constituent to a dual shock: higher accumulation costs and slowing orders. Energy prices and increases successful earthy materials, peculiarly plastics and chemicals, are pushing costs upward, while request from some home and overseas markets is softening amid fears that the geopolitical situation could pb to a planetary recession. Businesses are uncovering it progressively hard to sorb these costs, starring to higher merchandise prices.

Data from S&P Global Market Intelligence amusement Greece’s manufacturing purchasing managers’ scale fell to 52.4 successful April, a seven-month debased from 54.5 successful March. Although the scale has remained supra 50 for 39 consecutive months, indicating continued expansion, maturation successful caller orders was marginal and among the weakest recorded successful the past 18 months. Foreign request declined astatine its fastest gait since December 2022. “Widespread uncertainty among customers and unit from higher costs had a antagonistic interaction connected demand,” S&P Global said.

Supply concatenation disruptions are compounding the problem, with transportation times for inputs lengthening to their highest level successful 3.5 years. Shipping routes person been affected by rerouting astir Africa and caller obstacles linked to tensions successful the Strait of Hormuz. Shortages of cardinal inputs person driven those prices to a four-year high, with output prices rising astatine the fastest complaint successful 3.5 years.

Tourism, different pillar of the economy, is besides under pressure. Higher vigor costs are expanding operating expenses for hotels and transport, squeezing nett margins. While request for travel to Greece remains strong, manufacture experts accidental rising costs are outpacing revenues. Hoteliers person offered mean discounts of astir 15% to unafraid bookings, supporting short-term liquidity but reducing nett income.

At the aforesaid time, accrued travel costs are limiting visitors’ spending capacity. Additional burdens from taxation and labour shortages further erode profitability, raising concerns astir the sector’s semipermanent sustainability.

Warnings implicit ostentation are besides intensifying, with forecasts pointing to 3.3% successful 2026. Bank of Greece Governor Yannis Stournaras said concerns astir a imaginable recession are justified, underscoring the increasing uncertainty surrounding the economical outlook.