Greece has rebounded well from the COVID-19 crisis, generating strong employment growth. Increasing investments and exports, government support measures, implementation of the Greece 2.0 Recovery and Resilience Package and the reforms of the past decade have been supporting the economy. However, headwinds from surging energy prices and uncertainty following Russia’s war of aggression against Ukraine have slowed the recovery. Achieving and maintaining modest primary budget surpluses, better targeting energy support measures and maintaining public revenues while further broadening the tax base and improving its efficiency will further enhance Greece’s prospects of achieving an investment-grade sovereign debt rating. Maintaining the reform momentum, completing the restoration of banks’ health and continuing efforts to improve the business climate can ensure that a sustainable recovery continues over the longer term. This would also support Greece in further raising living standards as it adjusts to a changing climate and achieves net zero emissions. As elsewhere, the changing climate is already disrupting livelihoods and well-being in Greece. A well-chosen mix of carbon pricing, public infrastructure investments, raising buildings’ energy efficiency and moving transport onto low-emission modes can achieve emission cuts cost-effectively, while making people better off with improved housing quality and mobility. Engaging all stakeholders, maintaining a consensus and supporting vulnerable households affected by the green economy transition will help ensure progress continues into the longer term.
Growth is expected to moderate from 6.7% in 2022 to 1.6% in 2023 and 2024. Despite the rebound in tourism and continued fiscal support, consumption is projected to slow in 2023 as real incomes shrink and uncertainty remains elevated. Receding energy prices are projected to reduce inflation and support consumption in 2024. Disbursements of Greece’s Recovery and Resilience Plan are projected to sustain modest investment growth in the face of higher costs.
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The COVID-19 crisis adds urgency to addressing Greece’s long-standing challenge of boosting investment and productivity to diversify the economy and improve job creation. Despite continued progress in reform efforts, such as digitalising the public administration, red tape, low-quality regulations, and a slow justice system mar the business environment. Coupled with significant gaps in the workforce’s skills, these inhibit firm growth and discourage innovation and investment.
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