“The prospects of the Greek economy for 2024 and 2025 remain favorable, with forecasts for faster growth compared to the Eurozone, despite the high uncertainty at the international level” is emphasized, among other things, in quarterly report of the Parliamentary Budget Office.

At the same time, it is noted that “the Greek economy seems to have developed a resilience, mainly due to manufacturing and exports, which emerge as critical growth factors, along with investments and consumption”.

However, the Office considers that the challenges remain and have to do with the investment gap, climate change and the demographic problem, which are important issues for the future.

The head of the Budget Office Professor Yiannis Tsoukalas stressed, in response to a related question, that the revenues from the fight against tax evasion amount to 870 million euros.

Growth rate of 2.3% in 2024

At the same time, the report notes that “the Greek economy continued its upward trajectory for the second consecutive quarter, recording a strong growth rate, according to ELSTAT’s provisional data for the second quarter of 2024. The Gross Domestic Product (GDP) showed an increase of 2.3 % compared to the corresponding quarter of 2023, surpassing the Eurozone average of 0.6%. This increase is mainly attributed to the strengthening of investments, exports and private consumption”.

The Bureau’s revised forecast for the annual growth rate of the Greek economy for 2024 amounts to 2.3%slightly lower than the previous estimate of 2.5%, as published in the June report. Despite the review, the outlook remains positivewith estimates ranging from 2.1% to 2.7%. These estimates are aligned with the forecasts of international organizations, such as the European Commission, the International Monetary Fund and the Bank of Greece.

The new National Medium-Term Fiscal Plan, submitted in September 2024, estimates the growth of the Greek economy at 2.2% for the year.

An important factor for long term developmentaccording to the Office, are the investments in fixed and human capital, which enhance productivity. In order to achieve this goal, the Greek economy must transform its production model towards sectors of high added value, which will strengthen its international competitiveness.

An important area addressed in this report is the processingwhich has recovered significantly in recent years. The contribution of manufacturing to GDP amounts to 10.4% in the second quarter of 2024, significantly increased compared to 8.6% in 2009. Manufacturing is the only sector of the Greek economy in which labor productivity has not only returned at the pre-crisis levels, but also beyond them. Specifically, labor productivity in this sector has increased by 43% from the first quarter of 2009 to the second quarter of 2024.

The export nature of the sector, with 29.3% of export businesses coming from it and covering 68.1% of the country’s total exports (data for 2022), plays a decisive role in its high performance. Export manufacturing firms have higher productivity due to increased international competition, which creates incentives for innovation and cost containment.

Another reason for the recovery in manufacturing is increased investment in the sector, mainly from the Recovery and Resilience Fund (RESF). According to the Bank of Greece, investments in manufacturing increased significantly in the period 2021-2022, due to inflows from the TAA, leading to an increase in the added value of the sector by 5.5% in 2021 and a further 7% in 2022. Important are and spending on research and development, which in the manufacturing sector is more than double as a percentage of value added (10.8% vs. 3.1% of the economy as a whole for 2021). In addition, the average wage in the manufacturing sector is significantly higher than the average wage in the economy as a whole, due to increased productivity.

Strengthening the manufacturing sector is emerging as an important pillar for achieving long-term growth and diversifying the Greek economy, adding a third pillar of growth beyond tourism and shipping. This diversification boosts sustainable economic growth, while boosting productivity in the manufacturing sector helps keep prices down, to the benefit of consumers.

Surplus of 8.2 billion in 8 months

On the fiscal front, the consolidated Primary Result of the General Government for the eight months of January-August 2024 shows a surplus of 8.232 billion euros, i.e. increased by 3.943 billion euros compared to the corresponding eight months of 2023.

The primary surplus amounts to 3.5% of GDP. This improvement is attributed to a number of factors, such as increased tax revenue due to improved employment and increased wages, h boosting tourism revenueswhich increased by 5.6% in the seven months of 2024 compared to 2023, and the increase in electronic transactions, as a result of the measures that have been implemented, such as the interconnection of cash registers with POS.

Also important for fiscal stability is the adoption of the new EU economic governance framework, which entered into force in April 2024. This new framework focuses on realistic debt reduction and the containment of fiscal deficits in periods of growth, in order to ensure fiscal space to deal with crises. In this context, each member state will submit medium-term budget plans in cooperation with the European Commission, while net primary expenditure will be subject to strict controls, taking into account the characteristics of each country.

The new Medium-term Fiscal Plan of Greece envisages an average annual increase in net primary expenditure of 3.5 billion euros for the period 2025-2028. This plan also includes a coherent investment and reform programme, to be financed in part by the TAA and the enhanced national public investment programme, aimed at growth and increasing incomes. Based on this, debt as a percentage of GDP is expected to decline to 133.4% in 2028 and 114.9% in 2038.

Finally, as noted, with regard to inflation, the Harmonized Index of Consumer Prices for August 2024 shows a slight increase to 3.2%, compared to 3.0% in July, while food inflation decreased to 2.0%. This reduction in food inflation is attributed to measures to enhance competition and the decline in international raw material prices.