The Bank of Greece said in a monetary policy report that economic growth could turn out higher than its baseline projection of 3.2% if the strong performance of the first quarter continued in the next quarters.
"However, the risks are tilted to the downside and relate to a further escalation of geopolitical instability, a worsening international economic climate, a disruption in energy supply and a consequent further increase in energy prices," the report said.
The Bank of Greece expects growth to pick up to 4.1% next year and stay high at 3.6% in 2024, provided the geopolitical crisis abates by the end of 2022 and energy prices decline.
Consumption expenditure is projected to keep rising in this year but at a much weaker pace due to lower real disposable income and higher uncertainty, it said.
Exports of goods showed resilience during the pandemic and are projected to grow at a "satisfactory pace" in 2022-2024.
Exports of services are expected to rise, with tourism revenue this year seen rebounding to about 80% of 2019 levels and remain on an upward trend in 2023-2024.
Headline consumer inflation is projected to average 7.6% in 2022, mainly driven by energy and food prices, before weakening next year.
The main challenge facing the economy is to continue its dynamic recovery, which started in 2021 in an unfavourable international environment, the Bank of Greece said.
"The coronavirus pandemic, the energy crisis, the surge in inflation and heightened uncertainty are exacerbating some of the problems already facing the Greek economy as a legacy of the 10-year debt crisis," it said.
"These could have a negative impact on both the short-term and the long-term prospects of the economy."
(Reporting by George Georgiopoulos; Editing by Alison Williams)