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GDP growth is projected to rise to 2.3% in 2018, and then moderate to 2% in 2019. Private consumption and investment will lead the recovery, responding to reduced policy uncertainty and gradually improving financial conditions. Exports should continue to increase, supported by rising external demand. Accelerating imports will subtract from growth in 2019. Excess capacity is diminishing but remains exceptionally large, limiting price and wage pressures.
The budget surplus is on track to exceed the 2017 target, through improved tax compliance and restrained expenditure. Further progress is needed in addressing tax arrears. Reducing high levels of poverty, especially among young people, remains urgent. The guaranteed minimum income programme is a welcome first step but social protection overall needs to be refocused. The recent spending review has identified fiscal space for a moderate expansion of targeted social programmes. Continued product market reforms would further improve competitiveness.
Greece’s high public debt and banks’ large stock of non-performing loans (NPLs) are sources of financial vulnerabilities. Putting public debt on a stable downward path will require sustained reforms to boost potential output and additional debt restructuring. Banks’ large stock of NPLs adds to risks and limits banks’ lending. Gradually curing and disposing of NPLs while ensuring banks retain sufficient capital buffers is a priority.
Economic Survey of Greece (survey page)