Record Olive Oil Prices Drive Food Inflation in Greece

Summary

A study from the National Bank of Greece found that olive oil con­tributes sig­nif­i­cantly to the coun­try’s high food infla­tion rate, reach­ing 5.4 per­cent in April 2024. Despite this, some mar­ket ana­lysts argue that the actual weight of olive oil in the Greek price index may be lower due to chang­ing con­sumer behav­ior in response to record-high prices.

According to a study from the National Bank of Greece on infla­tion and short-term eco­nomic chal­lenges, olive oil alone accounts for almost half of the country’s food infla­tion.

Food infla­tion is the rate of increase in food prices, usu­ally mea­sured by the Consumer Price Index (CPI), which cal­cu­lates the monthly changes in con­sumer prices based on a rep­re­sen­ta­tive bas­ket of goods.

The study said food infla­tion is slow­ing down in Greece but remains high, reach­ing 5.4 per­cent in April com­pared with the same month one year ago. This is due to the out­sized impact of olive oil in the CPI and the adverse weather that heav­ily impacted the crops in cen­tral Greece last September.

By com­par­i­son, the annual food infla­tion in the rest of the Eurozone coun­tries stood at 2.2 per­cent in April 2024.

However, if the weigh­ing of olive oil in the Greek CPI were ignored, food infla­tion in the coun­try would then total 2.6 per­cent, the study noted.

“The aver­age price of olive oil increased by 29.4 per­cent per annum in 2023 and by 63.7 per­cent in April 2024, adding 0.5 per­cent­age points to over­all infla­tion and account­ing for almost 50 per­cent of the increase in total food infla­tion over the same period,” the bank’s ana­lysts wrote.

According to stan­dard prac­tice, olive oil accounts for 0.9 per­cent of food price rises in Greece due to its high pen­e­tra­tion in Greek house­holds, com­pared to 0.2 per­cent in the rest of the Eurozone coun­tries.

Some mar­ket ana­lysts, how­ever, argued that olive oil’s actual weight in the Greek price index is lower than offi­cially accepted, con­sid­er­ing the change in con­sumer behav­ior caused by the record-high prices of olive oil on super­mar­ket shelves.

In con­fir­ma­tion, indus­try experts have said con­sumers in Greece have started to opt for veg­etable oils instead of olive oil as their main cook­ing oil due to record prices.

“Greek con­sumers have reduced their con­sump­tion of olive oil by up to 40 per­cent due to the high prices and have turned to other oils, such as seed oil,” said Manolis Giannoulis, the head of EDOE, the national inter­pro­fes­sional olive oil asso­ci­a­tion.

“We still have a long way to go before things get back to nor­mal,” he added.

Greece his­tor­i­cally ranks among the world’s top olive oil-con­sum­ing nations, with a per capita annual con­sump­tion of around 12 liters.

Meanwhile, the Greek gov­ern­ment and the par­lia­men­tary oppo­si­tion have also argued about the effect of olive oil prices on food infla­tion.

Both the cen­ter-right New Democracy rul­ing party and the left-wing Syriza oppo­si­tion have pointed to inac­cu­rate fig­ures – olive oil being respon­si­ble for a 22 per­cent and 4.27 per­cent rise in food prices, respec­tively – that are a far cry from the recorded 50 per­cent, accus­ing each other of mis­in­form­ing the pub­lic at a time when Greeks are grap­pling with the ris­ing food costs in the coun­try.

• National Bank of Greece
• Business Voice