OECD Economic Outlook, Volume 2025 Issue 1

Greece

GDP growth is projected to remain resilient at 2.0% in 2025 and 2.1% in 2026. Disbursements of EU Recovery and Resilience Funds will strengthen investment, and minimum wage increases will support a pick-up in consumption, as exports slow alongside external demand. Headline inflation will ease to 2.0% in 2026, helped by lower oil prices, despite rising trade costs and persistent services inflation. Implementation delays of EU funds, excessive wage growth or renewed extreme weather events could dampen the outlook.

Sizeable primary fiscal surpluses are projected in 2025 and in 2026, at 2.1% and 2.2% of GDP respectively, underpinned by improved tax compliance. Keeping public debt on a firmly declining path should remain a priority, as ageing costs and investment needs add to future spending pressures. Maintaining the reform momentum to improve the business environment and ease high labour shortages would support investment growth. Continuing efforts to reduce tax evasion and limit tax expenditures would raise revenues, while making room to reduce the labour tax on low-wage earners, and encouraging further employment gains.

The economy remains strong

The economy grew by 0.9% in the fourth quarter of 2024, driven by investment. Business expectations in manufacturing and service sectors have softened but continued to point towards expansion in April 2025. Employment rose by 0.5% in the year to March 2025, while nominal wages grew by 5.4% in the year to the fourth quarter of 2024, with labour shortages remaining historically high. Annual headline inflation remained elevated at 2.6% in April 2025 and core inflation stood at 3.8%, driven by services price inflation.

Greece

Source: OECD Consumer Prices database; and OECD Economic Outlook 117 database.

Statlink

Greece: Demand, output and prices

Statlink

Business lending has continued to grow in recent months. Lending to non-financial corporations from August 2024 to March 2025 was 14% higher than a year earlier. Interest rates for new loans to households and firms fell from 5.7% in August 2024 to 4.3% in March 2025. The trade deficit widened in 2024, with import growth outpacing exports amidst moderate growth in tourism. Travel receipts over the second half of 2024 were 1.8% higher than a year earlier, down from high growth rates in previous years, and exports of goods in the fourth quarter of 2024 were 3.3% lower compared than a year earlier. Trade links with the United States are limited, but new US tariffs will also weigh on exports by lowering demand from trading partners such as Germany.

Fiscal policy will remain supportive

The fiscal stance will remain supportive, as disbursements of Recovery and Resilience grants and loans are projected to rise from 1.8% of GDP in 2024 to 3.6% in 2026. Stronger tax revenues, bolstered by enhanced tax collection measures, are projected to support sustained primary surpluses and create room for additional spending. A primary surplus of 2.1% of GDP in 2025 and 2.2% in 2026 will contribute to a further decline in the debt-to-GDP ratio to 140% in 2026 (Maastricht definition). New fiscal measures for 2025 include a reduction in social security contributions by 1 percentage point (0.2% of 2024 GDP) and permanent increases of incomes for pensioners (0.2% of GDP) and public servants (0.1% of GDP). The minimum wage increased by 6% in April 2025 and is planned to be raised cumulatively by 8% between April 2025 and April 2027. Public sector wages, which were frozen, are being raised to align with the rising minimum wage.

Growth will remain resilient

GDP growth is projected to remain resilient at 2.0% in 2025 and 2.1% in 2026. Rising disposable income will support a pick-up in consumption. Investment growth, supported by growing disbursements of Recovery and Resilience Funds, will remain robust despite heightened international uncertainty. Rising labour shortages will moderate employment growth while supporting rising wages. New US tariffs and easing external demand, notably from EU trading partners, will slow export growth. Headline inflation is projected to return slowly towards 2.0% in 2026 amidst persistent core inflation. Implementation delays of the Recovery and Resilience Plan “Greece 2.0” could put the planned investment growth at risk. If wage growth were to persistently outpace productivity gains, this could weaken exports further. Extreme weather events, such as the 2023 floods in Thessaly, could also weigh on domestic demand.

Strengthening investment further is a key challenge

The still high public debt level poses risks in the medium-term, while population ageing and climate change add to future domestic spending pressures. Low productivity continues to hold back competitiveness and living standards. Boosting investment will be key to strengthening growth while maintaining public debt on a firmly declining path. This will require an easing of remaining regulatory burdens and improvements in workers’ skills. Formalising and accelerating the review of existing business regulations while ensuring an effective consultation of stakeholders on new legislation would help continue recent success with making the regulatory framework more business friendly. Strengthening vocational training, rebalancing labour market policies towards training and counselling for unemployed workers and ensuring high training quality would reduce skill mismatches. Further reducing tax evasion and limiting tax expenditures – notably reduced VAT rates, which mostly benefit wealthy households – would raise revenue, making room for targeted social contribution cuts to strengthen work incentives.