Economy seen resilient despite challenges
Greece retains the capacity to service its debt, noted the European Commission’s third Post-Program Surveillance Report released on Thursday.
In its Fall 2023 report, the Commission said: “Despite several challenges, the Greek economic, fiscal and financial situation continues to be resilient. According to the debt sustainability analysis, Greece is assessed to face low risks in the short and long term, while medium-term risks appear to be high on the back of the still high debt-to-GDP ratio.”
It added that “government gross financing needs for the period 2023 to 2025 are low, due to projected significant primary surpluses and moderate debt amortization. Greece requested to repay 5.3 billion euros of the Greek Loan Facility early in 2023. Repayments of the principal on EFSF loans started this year, while the repayment of the ESM loans will only start in 2034.”
It added that “Greece has a very large cash buffer and has continued market access and regular successful bond auctions.”
The surveillance mission to Greece took place on October 2-5 and involved European Commission staff in liaison with European Central Bank staff. European Stability Mechanism staff participate on aspects relating to the ESM’s Early Warning System, and staff from the International Monetary Fund also participated.
The report noted specifically that “the Greek economy proved resilient in the face of external shocks and expanded by 5.6% in 2022.” Real GDP is expected to grow by 2.4% in 2023, 2.3% in 2024 and 2.2% in 2025, according to the Commission 2023 fall forecast.
Besides consumption, gross fixed capital formation is expected to be a key driver of growth as the implementation of the Recovery and Resilience Plan supports investments. The recent natural disasters are expected to have a relatively small impact on GDP growth in 2023, since the affected areas account for a limited share of total value added.
“Following the sharp decline in the first half of 2023, inflation is expected to continue decreasing, albeit at a slower pace, due to the waning negative base effect of past energy price shocks and solid wage growth amid tightening labor market conditions,” it added.
Employment is projected to increase further, although at a more moderate pace, in line with economic activity.
