In the Euro Area, there was a significant deceleration in economic growth during 2023, with an estimated increase in GDP of 0.4%. This is in contrast to the growth rates of +3.4% in 2022 and +5.9% in 2021. The main cause of this slowdown was the high energy prices, mainly due to Russia’s invasion of Ukraine, which had a negative impact on both household spending and corporate activity, particularly in the manufacturing sector. Although the economy showed better resilience than expected in the first half of the year, it experienced weaker-than-expected activity in the second half. The downturn towards the end of 2023 was a result of a broader weakness in the economy, which also affected the services sector. The decrease in inflation was accompanied by sluggish growth, reflecting the adverse supply shocks caused by the previous significant increases in energy prices. In 2024, the economic growth in the Euro Area is projected to be +0.7%, driven by a reduction in price pressures that should lead to higher real wages and disposable incomes. However, the delayed effects of previous tightening in monetary policy are anticipated to restrain domestic demand. The decrease in inflation is expected to contribute to higher real wages, along with an anticipated acceleration in growth as the lingering effects of previous price shocks dissipate.
In the United States, the economic expansion in 2023 surpassed initial expectations, despite the increase in borrowing rates and the tightening of credit conditions. Consumer expenditure remained robust, buoyed by accumulated savings, a strong labor market, and the additional income provided by one-time tax relief measures. Fiscal policy also contributed to the overall economic activity. However, it appears that the economic growth weakened in the final quarter of the year due to the lingering impact of restrictive monetary measures, which should have dampened household spending, especially as temporary measures supporting consumption were withdrawn. The estimated economic growth for 2023 stands at 2.5%, but it is projected to decelerate to 1.6% in 2024.
In relation to emerging economies, the economic growth of China is projected to have settled at 5.2% in 2023 (compared to 3.0% in 2022). The economic performance in China was generally lackluster in 2023, with a contraction in real estate investment and slower growth in infrastructure-related investment compared to the average before the pandemic. The initial boost in consumption following the relaxation of pandemic-related restrictions turned out to be unexpectedly short-lived. Although private consumption improved somewhat towards the end of the year, consumer confidence remained weak, and weak external demand negatively affected exports. In Turkey, the economy expanded by an estimated 4.2% in 2023, as opposed to 5.5% in 2022. After the elections in May 2023, the central bank implemented significant increases in the policy interest rate, rising from 8.5% in May to 42.5% in December 2023. Furthermore, regulatory changes slowed down credit expansion, which started to impede growth. In the second half of 2023, inflation surpassed 60%. Nevertheless, economic activity exceeded previous expectations, thanks to resilient private consumption and substantial fiscal expenditures following the earthquakes.
1 World Bank, Global Economic Outlook Update, January 2024
2 ΟPEC, “Monthly Oil Market Report”, January 2024
3 https://capex.com/en/overview/eurusd-price-prediction
4 ΟPEC, “Monthly Oil Market Report”, December 2023, January 2024
5 EIA, Today in Energy, https://www.eia.gov/todayinenergy/detail.php?id=611142, January 2024
Throughout the majority of 2023, oil prices traded at lower year-on-year levels. The average price of Brent crude oil in 2023 was $83 per barrel (bbl), which is 18% lower than in 2022. The downward trend in crude oil prices during the first half of the year was a result of concerns regarding economic deceleration. However, the volatility of Brent crude oil prices in the first half of 2023 was significantly lower than in 2022, when prices reached multi-year highs due to Russia’s fullscale invasion of Ukraine. In the second half of 2023, increased geopolitical tensions and concerns about crude oil demand led to heightened volatility. The year concluded with Brent crude oil prices at $78/bbl, $4 lower than the beginning of 2023.
Refinery throughput is estimated to have grown by 1.6m bpd in 2023. Benchmark margins for Mediterranean refineries fell vs record-highs reached in 2022 on improved supply-demand balances. However, they remained at above mid-cycle levels on the back of healthy oil products demand growth, refinery turnarounds, delays in commissioning of newly-built refineries and supply disruptions. The benchmark Med cracking margin averaged $8.4/bbl in 2023, $5.3/bbl lower y-o-y, while the benchmark Med Hydroskimming margin averaged $1.9/bbl, $0.5/bbl lower y-o-y.
The prices of natural gas in the European Union experienced a significant decline in 2023 due to various factors such as warm weather, abundant supply, and high gas inventories. Specifically, the average price of natural gas (TTF gas price) was €41.4/MWh in 2023 (-69% y-o-y). In July 2023, the price even dropped further to €29.5/MWh. These fluctuations in natural gas prices had a notable impact on the pricing of electricity in the wholesale market. In Greece, the Day Ahead Market Clearing Price (DAM MCP) averaged €119.5/MWh (-58% y-o-y). Furthermore, the price of carbon allowances in the European Union (EUAs) continued to rise during the first nine months of 2023. On average, the EU carbon prices reached €83.9/tn in 2023, representing a 4% increase compared to the previous year. This upward trend in carbon prices had consequences for various industries, including power generation and refining, as it affected their cost base.
8Bloomberg, EUA prices, January 2024
9Electricity prices are based on the DAM MCP, which stands for Day Ahead Market, Market Clearing Price, Source: Energy Exchange Group, January 2023
In 2023, the Greek economy experienced a satisfactory growth rate of +2.0% (compared to +5.6% in 2022), surpassing that of the Eurozone. This growth was primarily driven by improvements in private consumption, increased investments, and exports of goods and services, despite the challenges posed by high inflation and a slowdown in international trade. Furthermore, this positive development was accompanied by a gradual reduction in unemployment and a notable recovery in the domestic economic climate, reaching its highest level in 15 years, as indicated by the latest measurements from the Institute for Economic and Industrial Research (IOBE).
The recent upgrade of Greece’s sovereign credit rating to investment grade, after 13 years of being rated below investment grade, solidifies the progress that has been achieved. This is also reflected in the narrowing of the funding spread between Greece and other European countries. Despite the impacts of a restrictive monetary policy and regional geopolitical tensions, the Greek economy is expected to grow at a faster pace than the Eurozone in 2024 and the subsequent years. According to the Bank of Greece, the growth rate of the Greek economy is projected to reach 2.3% in 2024 and 2.5% in 2025. This growth will be primarily driven by investments, private consumption, and exports, while inflation is expected to gradually decrease in the coming years, aligning with the target set by the European Central Bank. Turning to fiscal indicators, the general government’s primary surplus is anticipated to increase to 2.1% of GDP in 2024, while the public debt is projected to stabilize at 152.3% of GDP.
Regarding energy consumption, preliminary official data reveals that domestic fuel demand in 2023 amounted to 6.6m MT, representing a 3% decrease compared to the previous year. However, the demand for automotive fuels witnessed an increase of 3.4% (diesel +2.8% and gasoline +4.1%) due to heightened mobility. On the other hand, there was a significant decline in heating gasoil consumption, which decreased by 32.8% as a result of milder weather conditions during the winter season.
Following Russia’s invasion of Ukraine in 2022 and the imposition of sanctions by the EU, the USA and other countries, exports of crude oil, oil products and natural gas mainly to Europe were reduced and flows were redirected, impacting the global energy markets. In 2023, a series of geopolitical events unfolded, further exacerbating tensions in the Middle East and subsequently impacting the transportation of raw materials and finished goods. While the direct impact on physical supply has been relatively minimal, the recent conflict in the Red Sea has caused disruptions in supply and necessitated longer trade routes. Consequently, the cost of reorganizing trade flows has increased. In light of these circumstances, the Company has made the security of supply a top priority. As a responsible entity, we closely monitor the evolving situation and make necessary adjustments to our operations as required.
10 IOBE, 3 Months Report on Greek Economy, Issue 4th/23, January 2024
11 Bank of Greece, Governor’s Annual Report 2023, April 2024
