A growth rate of the Greek economy of 2.2% in 2023 and 1.9% in 2024 is predicted by the OECD in its six-monthly report (economic outlook) published today.

Growth remains strong despite headwinds, the report notes, with fixed investment expected to increase by 8.9% as implementation under the Recovery and Resilience Fund intensifies.

The report says that in the last quarter of 2022 and early 2023, real consumption continued to rise, reflecting strong employment growth, while unemployment is forecast to decline from 12.4% last year to 11.2% this year and further to 10.4% in 2024. Private consumption is expected to grow less this year than in 2022 (1.7% vs. 8%) due to the reduction in household purchasing power from inflation.

For the harmonized index of inflation, the OECD notes that it has been falling since September 2022 but has gained a broader base. It predicts it will fall from 9.3% last year to 3.9% this year and further to 3.2% in 2024, while core inflation – which excludes energy, food, alcohol and tobacco prices – is expected to to rise from 4.6% last year to 5.5% this year, before falling to 3.3% in 2024. Prices for electricity, natural gas and heating fell in April by 27.9% from their peak of last September.

Ongoing labor shortages are driving up wages, the OECD notes, adding that the rate of growth has accelerated and that in April the minimum wage rose 9.4% after increases of about 10% in the first half of 2022.

Achieving and sustaining the government’s planned return to primary surpluses – to nearly 1% of GDP this year and 2% in 2024 – will help Greece manage inflationary pressures and achieve investment grade, the report said. The general government deficit is projected to fall from 2.5% of GDP last year to 1.5% this year and further to 1.3% in 2024.

The public debt will continue to decrease from 170.7% of GDP last year to 163.4% this year and 157.9% in 2024. The report also refers to the reduction of the spreads of the Greek 10-year bonds in relation to the corresponding German ones close to 130 basis points in late May from October 2022 highs.

Using any windfall or lower spending to reduce public debt instead of increasing transfers would help reduce inflationary pressures and reach investment grade, the Agency notes.

The current account deficit is forecast to reach 9.5% this year and 8.7% in 2024.

Further increases in employment rates, particularly among women and youth, would help address labor shortages, according to the OECD. Promoting the use of parental leave and flexible working arrangements and expanding childcare facilities could improve employment rates for women and young people, it says.

The OECD notes that the risk of new bad loans arising from higher interest rates is limited by the agreement by Greek banks to freeze mortgage rates until April 2024 as well as the relatively high proportion of recent fixed-rate loans.

The global economy

For the global economy, the OECD notes that it is on the way to recovery but it will be a long way to achieve strong and sustainable growth. Declining energy prices and headline inflation, the easing of supply constraints and the restarting of the Chinese economy, combined with strong employment and relative household economic resilience, are contributing to a projected recovery, which will however be weak with based on past data.

It forecasts growth of 2.7% of the global economy in 2023 and 2.9% in 2024, rates well below the average growth rate in the decade before the pandemic.

Inflation for G20 economies is forecast to ease from 7.8% in 2022 to 6.1% in 2023 and 4.7% in 2024, helped by falling energy and food prices, easing pressures from demand side and smaller bottlenecks on the supply side.