The Greek economy remains resilient and is expected to grow at a rate of 2 percent in 2024 and 2.5 percent in 2025 as rising employment and real wages and strong tourism boost consumption, according to the OECD’s six-monthly report (Economic Outlook).
Despite the slowdown in new job growth, the employment rate and labor force shortages remain at historically high levels, it was pointed out.
Wage growth reached 5.5 percent in the fourth quarter of 2023 on an annual basis, the OECD noted, with the minimum wage increasing by 9.4 percent in April 2023 and a further 6.4 percent in April 2024.
The report added that the absorption of Recovery and Resilience Fund resources and continued improvement in bank soundness will support investment, despite tight financial conditions, with investment forecast to grow 9 percent in 2025.
OECD on Greek economy and debt
Inflation will continue to decline, but at a slower pace, and is forecast to ease to 2.1 percent in the last quarter of 2025.
The forecast for a primary surplus of 1.8 percent of GDP this year and 2.1 percent in 2025 seems right, given the high public debt the report says, which is estimated to decline to 151 percent of GDP in 2025 from 161 percent in 2023. The growth of the economy and further progress in the fight against tax evasion will boost public revenues.
The OECD emphasized that the main challenges facing the Greek economy are the strengthening of productivity and fiscal adjustment due to high debt.
It noted that sustained and strong economic growth will be needed to continue reducing the debt, alongside the high spending that is necessary due to the low investment in the decade of the crisis, the aging of the population, and the response to climate change.
Productivity growth, which is a third lower than the OECD average, would simultaneously create more fiscal space and raise living standards.
Greece approved its 2024 budget in December, forecasting a rise in economic growth to 2.9 percent from 2.4 percent last year as a result of robust tourist revenues and EU funds helping investment.
Greece regained its investment-grade status in 2023 after thirteen years. Fitch Ratings upgraded Greece’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to BBB- from BB+.
Characterized by Greek finance experts as the strictest and most robust rating agency, Fitch rewards the Greek economy’s efforts by giving the country a vote of confidence.
Fitch was the second of the big three US rating agencies after S&P to give Greece a higher investment grade. This will allow more institutional investors to buy Greek bonds, thus increasing capital inflows and further helping to contain borrowing costs for the Greek government and businesses.
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