OECD: The Greek economy should grow by 2.8% in 2022, 2.5% in 2023
LONDON — Greece’s economy is expected to grow 2.8% this year and 2.5% in 2023, the Organization for Economic Co-operation and Development (OECD) said in its economic outlook report released on Wednesday.
The Paris-based organization said the recovery is expected to slow in 2022. Soaring global prices, heightened uncertainty and tighter monetary conditions will be partly offset by disbursements from Greece’s recovery and resilience plan, fiscal support for households and businesses, and increased exports and investment. Job growth is expected to come to a temporary halt as employers face greater uncertainty, difficulty hiring workers with the required skills, and rising wages. While supply pressures have increased, the remaining spare capacity will ease price pressures.
Specifically, the OECD said incomes supported by higher prices and the recovery will help the government return the budget to a primary surplus in 2023. Use windfall incomes and savings to rebuild the budget surplus and ensure support measures are temporary and targeted to vulnerable people. household income, rather than subsidizing prices, would further improve fiscal sustainability. Greater fiscal sustainability, along with the resolution of banks’ remaining non-performing loans, would help Greece achieve an investment-grade sovereign debt rating, thereby improving access to finance. As Greece transfers its energy supply from Russia, improving energy efficiency and developing renewable sources would support long-term energy security and sustainability.
“Greece is mainly exposed to the war in Ukraine through its energy imports from Russia, equivalent to 30% of its total energy consumption. Higher international prices are passed on to domestic energy prices, such as the 79% increase in retail electricity prices in the year to April 2022. Russia and Ukraine are also minor trading partners. Russian tourists generated 1.1% of Greece’s tourism receipts in 2021. The maritime services sector, which accounted for 20% of total exports in 2019, benefits from high global shipping demand and prices. Greece is also providing specific support to around 20,000 Ukrainians, in addition to the 32,000 refugees from before the start of the war.
“The government expects to achieve a modest primary fiscal surplus in 2023, although it expects slower fiscal consolidation than it did at the end of 2021. It has cut tax and social contribution rates and taxes recurring land. It announces the expansion of measures responding to soaring energy prices. The total cost for 2022 was €5.4 billion (2.7% of GDP) in May 2022, with higher spending expected, partly funded by revenues from the emissions trading scheme. These expand access and increase the level of electricity and fuel price subsidies for households and businesses, provide a discount on fuel costs with generous eligibility criteria and complement social transfers for low-income households. Partly offsetting these measures, monetary conditions are tightening in Greece more than elsewhere in the euro area, widening spreads on government and corporate bond yields, the lower investment grade sovereign rating of Greece excluding it from the ECB’s standard asset purchase programs. The ECB has pledged to provide exceptional support to ensure that monetary conditions in Greece do not deviate significantly from those in the rest of the euro area in the event of further market fragmentation linked to the pandemic.
“Soaring energy prices, likely to last through 2023 as a result of the embargo on oil imports from Russia, tighter monetary conditions and disruptions in global trade are expected to significantly slow the recovery Inflationary pressures and renewed uncertainty are weakening private consumption and weakening business confidence, investment and job creation Government support and implementation of the recovery and resilience plan, d 1.6% of GDP per year, will provide offsetting support Energy subsidies and, from the end of 2023, the expected decline in energy and other international prices will moderating headline inflation and, more gradually, underlying inflation Greater stability in the global security situation and energy prices will reduce uncertainty and enable investment estival and consumer demand to drive growth.
“Additional disruptions to energy supplies, particularly gas, would amplify current high energy prices and hamper improvements in activity, exports and welfare. A larger-than-expected wage increase would risk entrench rising inflation, partially offset improved competitiveness, and weaken investment and exports Rising material costs and scarcity of skills can hold back public investment. Energy price support measures and poorly targeted subsidies can weaken fiscal credibility and the return to higher quality sovereign debt ratings.
“Deteriorating economic conditions and rising interest rates risk stalling improving bank health by creating new non-performing loans and making it more difficult to securitize existing non-performing loans or raise capital. Ending current fiscal measures as planned and limiting any further measures to well-targeted temporary support to vulnerable households would allow the government to rebuild its primary fiscal surplus. This would maintain Greece’s reserves to cover contingent liabilities, build fiscal reserves and support efforts to achieve an investment grade sovereign rating. Developing the wage-setting system so that the social partners negotiate broad agreements on working conditions that reflect worker productivity and market conditions, rather than relying on administered adjustments to the minimum wage, would improve labor market conditions. labor market performance. Expanding building retrofit plans would accelerate progress towards high rates of energy poverty and low energy efficiency, improving energy security and reducing greenhouse gas emissions over the long term,” the report said. OECD.