OECD: Robust Greek economic growth projected despite headwinds

Greek economic growth will remain robust, with real GDP growth projected at 2.2% in 2023 and 1.9% in 2024, according to the Paris-based Organization for Economic Cooperation and Development (OECD). The OECD’s economic outlook survey, released on Wednesday, highlights that economic growth remains strong despite headwinds, with fixed capital investments expected to grow by 8.9% aided by the implementation of the European Recovery and Resilience Fund (RRF).

The survey also notes that in the last quarter of 2022 and early 2023, real consumption continued to grow, reflecting a significant increase in employment. Unemployment is projected to decline from 12.4% last year to 11.2% in 2023 and further to 10.4% in 2024. Private consumption is expected to experience slower growth compared to 2022 (1.7% compared to 8%), primarily due to a decline in households’ purchasing power caused by inflation.

The country’s harmonized inflation rate has been steadily declining since September 2022 but has broadened its base. The inflation rate is projected to decrease from 9.3% in 2022 to 3.9% this year and further to 3.2% in 2024. However, core inflation, which excludes energy, food, alcohol, and tobacco prices, is expected to rise from 4.6% last year to 5.5% in 2023 before falling to 3.3% in 2024. Energy prices experienced a decline of 27.9% in April compared to September 2022 levels.

The OECD also highlights that ongoing labor shortages are driving wages higher. The minimum wage increased by 9.4% in April, following a rise of around 10% in the first half of 2022. The survey suggests that achieving and sustaining primary surpluses, estimated at around 1% of GDP this year and 2% in 2024, will aid Greece in managing inflationary pressures and regaining investment-grade status. 

Furthermore, the survey predicts that the general government deficit will decrease from 2.5% of GDP last year to 1.5% this year and further to 1.3% in 2024. Public debt is anticipated to continue its decline, decreasing from 170.7% of GDP in 2022 to 163.4% in 2023 and 157.9% in 2024. 

The OECD notes that using any unexpected revenue or reducing spending on public debt could help alleviate inflationary pressures and achieve the goal of regaining investment-grade status. The country’s current account deficit is projected to decrease to 9.5% this year and 8.7% in 2024. 

The survey emphasizes that the risk of creating new non-performing loans due to higher interest rates is contained through an agreement between Greek banks to freeze mortgage loan interest rates until April 2024, as well as a relatively high percentage of new loans with stable interest rates. [AMNA]