Greece’s real GDP growth remains well above the EU average, the European Commission has highlighted. This is according to its individual member country report on social, economic, employment, structural, and budgetary policies. This comes after a period of recovery from the Covid-19 pandemic.
“Following the rapid post-pandemic pick-up in 2021 and 2022, when the annual growth rate averaged 7 percent, real GDP increased by 2 percent in 2023,” states the report. “Consumer spending stayed solid, fueled by income growth, while tourism revenue picked up and net exports strengthened.”
The report continues:
“By contrast, after very strong growth in 2021 and 2022, investment decelerated in 2023 as interest rates inched upward. However, capital accumulation has been supported by a strong take-up of loans under the Recovery and Resilience Facility (RRF). GDP growth is expected to pick up slightly to 2.2 percent in 2024 and 2.3 percent in 2025 and to continue to exceed its long-term potential, supported by strong investment due to easing credit conditions and significant EU funding.”
According to the report, inflation in Greece is set to continue its gradual decline. HICP (consumer price) inflation fell from 9.3 percent in 2022 to 4.2 percent in 2023, 1.2 percentage points below the euro currency area average.
Greece’s need for improvement, according to EU report
In contrast, labor productivity has been rising in Greece but is still well below the EU average. The report states:
“Following a decade of decline, real [labor] productivity started to increase in 2021 at rates above the EU average, partly due to the COVID-19 crisis that triggered the digital transformation of businesses.
However, despite the recent pick-up in investment, the legacy of subdued investment over the previous decade has hampered productivity developments. At sectoral level, the largest productivity gains were generated by manufacturing and in service sectors, except for tourism activities, while since 2018, the largest losses have been recorded in the energy and mining sectors.”
Additionally, Greece’s relatively low research and development spending and skills gaps continues to hamper productivity. Despite having increased significantly in recent years, research and development expenditure amounted to 1.5 percent of GDP in 2022. This is noticeably below the EU average of 2.2 percent, mostly due to low, though increasing, spending by businesses.
The report additionally says:
“The education system’s performance is mixed. There are good results in reducing the number of students leaving school early and achieving higher rates of post-secondary educational attainment. However, there are also poor and deteriorating results in basic skills as reflected in the recent Programme for International Student Assessment (PISA) survey of the OECD.”
Regional disparities persist. More than 50 percent of Greece’s population and 60 percent of its economic activity is concentrated in the regions of Attica (Athens) and Central Macedonia (Thessaloniki).