Greece’s economy is strong and is projected to grow at a rate of 2.3% in 2024, 2.2% in 2025 and 2.5% in 2026, according to the biannual OECD Economic Outlook report released by the Organisation for Economic Cooperation and Development (OECD) on Wednesday.
“Rising disposable income will strengthen consumption, as a tight labour market and minimum wage increases support wages,” according to the report.
The OECD notes that real household income per person is rising and is higher at present than before the pandemic, as well as being higher than expected based on pre-pandemic trends.
The fact that Greece, together with Portugal and Spain, is one of the few OECD member-states with upward revisions of potential per capita growth “also indicates that structural reforms are yielding benefits over the course of time, as these countries are among those that carried out the most reforms in the two previous decades,” the report noted.
Employment growth is projected to ease progressively amid rising labour costs, the report said. It noted that nominal wages have increased by 8.6% in the second quarter of 2024 on an annual basis, while labour shortages are historically high.
Inflation is expected to reach 2% in late 2026 amid persistent services and core inflation.
Disbursements of EU Recovery and Resilience funds will support a spike in investment, with the OECD noting that they will rise from 1.8% of GDP in 2024 to 3.6% of GDP in 2026. Implementation delays in spending EU funds, excessive wage growth or renewed extreme weather events could dampen the outlook, it added.
“Keeping public debt on a firmly declining path should remain a priority, as ageing costs and investment needs will add to future spending pressures,” the report said. It projected that primary surpluses of the order of 2.4% of GDP in 2025 and 2026 will help further reduce public debt to 148.1% of GDP in 2026. It also noted that the reduction in social insurance contributions that was announced (corresponding to 0.2% of GDP) and an increase in pensions (also corresponding to 0.2% of GDP) will support incomes in 2025.
“Limiting tax expenditures, notably for fossil fuels, and continuing efforts to combat tax evasion would also raise revenues and make room to reduce the labour tax burden for low-wage earners, encouraging further employment gains,” it added.
The OECD report also sees resilience in the global economy: “In the past few years, the global economy has demonstrated remarkable resilience despite being subject to major shocks such as the pandemic and an energy crisis. This year, global growth has remained stable, while inflation continued to decline. Despite some easing in labour markets, unemployment rates are still near historical lows in many countries. Global trade has also been recovering.”
It forecasts that this resilience will continue with an increase in global GDP of about 3.3% in both 2025 and 2026 and an easing of inflation toward central bank targets.
“However, this robust overall performance masks significant differences across regions and countries, and is surrounded by important downside risks and uncertainties. More specifically, there are increasing risks related to rising trade tensions and protectionism, a possible escalation of geopolitical conflicts, and challenging fiscal policies in some countries,” it added.
For the European Union, it projects that GDP will increase by 1.3% in 2025, 1.5% in 2026 and 0.8% this year.
