Greece’s financial growth mannequin will face its essential challenges in the long run, states in his interview with “Vima” the Antoine Gougar, senior OECD economist, accountable for the supervision of the Greek economic system. Low productiveness, weak expertise, labor shortages are main issues, whereas excessive debt exposes Greece to market dangers in the long run, regardless of the favorable construction of period and rates of interest, the OECD official factors out.
What are crucial challenges and difficulties dealing with the Greek economic system?
“The Greek economic system has properly overcome the current crises. GDP development has outpaced the eurozone for the previous three years. As exterior demand strengthens, the economic system emerges with vital beneficial properties in competitiveness, rising funding and traditionally low ranges of unemployment. Public debt declined and Greece’s sovereign debt regained funding grade in 2023. Within the OECD Financial Outlook in Could we anticipated development to stay above the euro space common, at 2% in 2024 and a couple of.5% in 2025, supported by elevated consumption and funding with the help of the European Restoration and Resilience Funds.
However there are risks on the horizon. Companies have been hit by the pandemic, adopted by the struggle in Ukraine and imported value pressures, and a few might discover it tougher to repay their debt now. Households additionally face greater debt servicing prices because of greater rates of interest, which can be tougher to cowl. Whereas the reforms and investments of the “Greece 2.0” Restoration and Resilience Plan, together with the disbursement of loans to companies, will enhance development, there’s all the time the danger of delays with such giant authorities disbursements. If implementation delays are lengthy and widespread, then funding and development could possibly be decrease.
As well as, new excessive climate occasions, akin to flooding in Thessaly, may disrupt manufacturing and scale back home demand. Greece’s financial development mannequin will face its essential challenges in the long run, as highlighted in our 2023 Financial Survey. Regardless of sturdy development, labor productiveness has remained stagnant and low, particularly among the many many small companies. Labor shortages have gotten extra acute and expertise are weak on common, as measured by the OECD’s Grownup Expertise Survey.
Rising the low employment charges of ladies, youth and older employees can be key to addressing opposed demographic developments. As well as, public debt remained at 161% of GDP on the finish of 2023, which exposes Greece to market dangers in the long run, regardless of a positive maturity and rate of interest construction.”
What retains Greek productiveness at low ranges?
“The Greek economic system remains to be a few third much less productive than the common OECD nation (when it comes to GDP per hours labored, based mostly on 2022 information). And what’s maybe extra worrying is that productiveness has didn’t catch up over time. A legacy of low non-public and public funding weakens productiveness and the flexibility of companies to make the most of alternatives in digitization and the inexperienced economic system.
Some proof means that the economic system may do higher by channeling labor and capital into extra productive companies and actions. A lot of the workforce and capital inventory is trapped in low-productivity and low-growth companies, particularly small companies, and as a legacy of the disaster many belongings are nonetheless locked up in non-performing loans. Regulatory insurance policies may also play a job right here, as boundaries to market entry stay excessive in some key professions, akin to authorized providers.
Grownup expertise are low, whereas uptake of expertise packages stays low. Within the coming years, we anticipate that the “Greece 2.0″ program will enhance funding and reforms and thereby enhance productiveness development and funding. The intention ought to be to maintain these efforts, as greater productiveness development is the important thing to stronger development, provided that Greece’s getting older workforce and the prices of transitioning to a greener economic system will act as a drag on financial development.”
How may the Greek economic system develop into extra aggressive?
“Greece has made noticeable beneficial properties in competitiveness. Exports have outpaced financial development since 2021, and manufacturing and high-tech exports are rising. With weak international situations and geopolitical tensions, in addition to manufacturing disruptions because of pure disasters, exports had been much less buoyant however confirmed resilience in late 2023 and 2024.
We anticipate export development to achieve 1.3% in 2024 and get better to 2.9% in 2025, amid a progressive strengthening of worldwide financial situations. When it comes to home elements, progress in exports and competitiveness has been held again by weak productiveness development. It’s important that the progress we’re seeing in rising wages and dwelling requirements is accompanied by greater productiveness development.”
How do you assess the curiosity of international traders to spend money on Greece?
“There was a transparent pattern in direction of better internationalization over the past 20 years, as measured by the depth of exports and imports, but additionally rising inflows of international direct funding (FDI). Regardless of the decline in 2023, FDI inflows reached €5 billion or 2.3% of GDP, properly above Greece’s pre-pandemic common. Just lately, FDI inflows have come from the actual property sector in addition to manufacturing, which is encouraging. Ongoing reforms are clearly bettering the enterprise surroundings and serving to to draw rising international direct funding.”
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