Rising costs and weakening demand are tightening pressure on Greece’s economy as the impact of the war in the Middle East deepens, with manufacturing and tourism showing increasing signs of strain and policymakers warning of broader risks.

In the industrial sector, the latest data point to a dual shock: higher production costs and slowing orders. Energy prices and increases in raw materials, particularly plastics and chemicals, are pushing costs upward, while demand from both domestic and foreign markets is softening amid fears that the geopolitical crisis could lead to a global recession. Businesses are finding it increasingly difficult to absorb these costs, leading to higher product prices.

Data from S&P Global Market Intelligence show Greece’s manufacturing purchasing managers’ index fell to 52.4 in April, a seven-month low from 54.5 in March. Although the index has remained above 50 for 39 consecutive months, indicating continued expansion, growth in new orders was marginal and among the weakest recorded in the past 18 months. Foreign demand declined at its fastest pace since December 2022. “Widespread uncertainty among customers and pressure from higher costs had a negative impact on demand,” S&P Global said.

Supply chain disruptions are compounding the problem, with delivery times for inputs lengthening to their highest level in 3.5 years. Shipping routes have been affected by rerouting around Africa and new obstacles linked to tensions in the Strait of Hormuz. Shortages of key inputs have driven those prices to a four-year high, with output prices rising at the fastest rate in 3.5 years.

Tourism, another pillar of the economy, is also under pressure. Higher energy costs are increasing operating expenses for hotels and transport, squeezing profit margins. While demand for travel to Greece remains strong, industry experts say rising costs are outpacing revenues. Hoteliers have offered average discounts of about 15% to secure bookings, supporting short-term liquidity but reducing net income.

At the same time, increased travel costs are limiting visitors’ spending capacity. Additional burdens from taxation and labor shortages further erode profitability, raising concerns about the sector’s long-term sustainability.

Warnings over inflation are also intensifying, with forecasts pointing to 3.3% in 2026. Bank of Greece Governor Yannis Stournaras said concerns about a potential recession are justified, underscoring the growing uncertainty surrounding the economic outlook.

Source: Ekathimerini.com