OECD: Growth 6.7% this year, 4.8% in 2022 and primary surplus 1% in 2023

By Tasos Dasopoulos

The forecast for growth of 6.7% for this year and 4.8% for 2022 and 2.9% for 2023 is forecast for Greece by the OECD with the help of green and digital investments that will be made using the funds of the Fund Recovery and exports.

According to the OECD report on the prospects of its member states (World Economic Outlook) GDP is projected to grow by 6.7% in 2021 and just under 5% in 2022, before growth moderates in 2023, as the economy entered a phase of strong recovery after the lifting of health restrictions in April with a greater-than-expected recovery in tourism.

In the run-up to 2022, the OECD notes the gradual withdrawal of economic support measures that will improve fiscal growth, while the recovery and resilience plan is expected to boost activity and productivity through investment in green transitions, digital infrastructure upgrades and digital infrastructure. and investment support for private companies. The OECD forecasts a 14% increase in investment for this year, 17.3% in 2022 and 10.2% in 2023. At the same time, it forecasts an increase in exports of 14.2% this year, 13% in 2022 and 5.1% in 2023.

The recovery and resilience plan boosts employment and investment. Government support will continue to boost incomes and consumption until 2022, which will be further supported by a 2% increase in the minimum wage in early 2022.

The OECD notes that the support measures have contributed and will continue to contribute to the further recovery of employment and consumption. In particular, it is emphasized that the government maintained emergency support measures throughout 2021 amounting to 15.6 billion euros (8.8% of 2021 GDP). Several interim measures have been extended until 2022 but have been reduced in size to 2.9 billion euros. In response to rising energy prices, the government has expanded transport to households by € 500 million. In the coming years, government measures will focus on supporting a sustainable recovery. Greece’s recovery and resilience plan, “Greece 2.0”, envisions disbursements of € 0.6 billion (0.3% of GDP 2021) in 2021, € 3.2 billion in 2022 and € 3.4 billion in 2023, funded by EU Next Generation grants. Measures include investment and policy reforms to support the green and digital transition. The budget is projected to return to a primary surplus of more than 1% of GDP by 2023, according to the government’s fiscal strategy.

Reviewing 2021 the report notes that from April to September, business confidence had recovered to highs after the financial crisis as businesses reopened. International air arrivals in July-August reached over 60% of their peak in 2019, boosting revenues and supporting the recovery of consumption and employment. Employment increased by 9.9% between April and September 2021. On the issue of red loans, the OECD notes that banks cleared 38% of their non-performing loans between March and June 2021, reducing the share of non-performing loans. 20.3% of non-performing loans, however, financing of the real economy remained low.

On the issue of inflation, he estimates that high levels of overcapacity are likely to curb rising inflation. as highlighted. In fact, it downgrades the recent rise, noting that although the annual inflation rate rose to 3.4% in October, largely due to rising energy prices, while structural inflation rose to only 0.2%.

The recommendations

The OECD notes that supporting investment in the coming years will require resolving outstanding non-performing loans and bank tax credits and improving the investment climate and public sector performance. Improving access to finance for investments by completing efforts to restore banks’ health will further enhance the impact of Greece 2.0.

Maintaining the recovery will require employee activation and increased adult skills to increase employment and productivity.

The OECD points out the risks and the time at which the health crisis will be fully controlled. In Greece, COVID-19 infection and death rates have been higher than most other OECD countries since July 2021, reflecting delayed vaccination rates, with 61.5% of the population fully vaccinated by in October 2021. Recent measures, such as requiring non-vaccinated individuals to access a range of public services, may encourage greater vaccinations. It is noted that the deteriorating health situation and investment delays would jeopardize the projected recovery.

It emphasizes that public investment needs to be strengthened to support growth. This, together with a medium-term fiscal plan, will contribute to fiscal sustainability. Better targeting of support measures, such as reductions in certain VAT rates for sectors such as entertainment, would increase their impact. Focusing support on active programs and training in the labor market, based on recent vocational education reforms and the implementation of plans to increase the capacity of the public employment service and promote training, would help employers to hire workers with the necessary skills. The implementation of measures to increase the efficiency of the public sector set out in “Greece 2.0”, such as further progress in the digitization of public services, is vital to improving the investment climate and achieving the ambitious expansion of public investment.

Finally, the implementation of a comprehensive plan for the adaptation and mitigation of climate change, which is already affecting Greece, will be imperative to maintain long-term growth.