Growth of the Greek economy of 2.4% this year and 2% in 2024, the OECD predicts with its six-monthly report (Economic Outlook) released today.

For 2025 it predicts that the growth rate will strengthen to 2.4%.

Private consumption is expected to slow due to the high cost of living and damage from recent natural disasters, but to strengthen gradually as inflation declines and as continued employment growth supports household purchasing power. Specifically, private consumption is expected to grow 1.4% this year and 1.6% in 2025 from 3.1% in 2023.

The improvement in the business environment and the increase in disbursements from the EU Recovery Fund as well as strengthening global economic conditions will support investment and exports. Investment is expected to increase by 5.2% in 2024 and 6.2% in 2025 after a 6.4% increase this year, and exports (of goods and services) by 0.9% and 3.3%, respectively, after an increase 3.1% this year. “Resolving current backlogs from the Recovery and Resilience Fund will boost investment, which is expected to rise from 1% of GDP this year to 2% in 2025.”

“Achievements in structural reforms and debt reduction have been reflected in Greece’s credit rating, which returned to investment grade in September 2023,” notes the OECD.

For inflation, the OECD says its decline will be slow due to wage pressures, as there are labor force shortages. Specifically, based on Eurostat’s harmonized index of consumer prices, inflation is forecast to decline from 4.3% at average levels this year to 2.8% in 2024 and further to 2.4% in 2025. Structural inflation – which excludes energy, food, alcohol and tobacco prices – expected to decrease from 5.7% this year to 3.2% in 2024 and 2.5% in 2025. For wages it is noted that they increased 4.3% on an annual basis in the second quarter of this year. “A more persistent inflation, or further disruptions to energy and supply, are key risks and could dampen consumption and investment growth,” the report notes.

The Agency notes that, with labor productivity remaining low, they should be a priority for further reforms to remove barriers to investment, particularly in the justice system, and to improve skills to raise living standards and ensure long-term fiscal sustainability.

Recent fires and floods highlight the need to adapt to a warmer climate, mainly by expanding property insurance coverage. “Promoting broader insurance for all buildings could limit the size of fiscal liabilities from increasingly extreme weather events and help speed up rebuilding after damage.”

Greece is expected to achieve increasing primary surpluses, notes the report, from 1.1% of GDP in 2023 to 2.1% in 2025, which will help to rapidly reduce public debt from 163% of GDP this year to 152% in 2025. The OECD notes that the level of debt remains high despite the welcome reductions made. Achieving primary surpluses of at least 1.5% of GDP in the longer term and supporting strong growth are important for fiscal sustainability, he stresses.

Increasing tax revenues and phasing out energy and food subsidies, which amount to 1% of GDP in 2023; creates some fiscal space for new fiscal interventions, according to the state budget. “Measures of 0.7% of GDP in 2023 and 1.1% in 2024 increase the incomes of pensioners, civil servants and low-income groups, although older pension reforms are expected to restrain public spending,” it noted. Public expenditure on fire and flood compensation is estimated at 0.3% of GDP this year.

Increasing the employment of women and youth remains very important to achieve further improvements in the potential productthe report states.