The EU Commission’s “Post-Programme Surveillance Report” on the Greek economy, released on Thursday in Brussels, underlines that the country retains the capacity to service its debt.
The Autumn 2023 Report, compiled under the direction of the Directorate-General for Economic and Financial Affairs, adds that “…Despite several challenges, the Greek economic, fiscal, and financial situation continues to be resilient.”
The report cites a debt sustainability analysis by which Greece is assessed to face low risks in the short and long term, while medium-term risks appear to be high on the back of the still high debt-to-GDP ratio.
“Government gross financing needs for the period 2023 to 2025 are low, due to projected significant primary surpluses and moderate debt amortisation. Greece requested to early repay EUR 5.3 billion of the Greek Loan Facility in 2023. Repayments of the principal on EFSF loans started this year, while the repayment of the ESM loans will only start in 2034. Greece has a very large cash buffer and has continued market access and regular successful bond auctions,” the port states.
The third post-programme surveillance mission to the country took place early last October, with participating experts representing the European Commission, the European Central Bank (ECB), the Stability Mechanism (ESM) and the International Monetary Fund (IMF).
Other highlights of the report include a forecast for real GDP to grow by 2.4% in 2023, 2.3% in 2024 and 2.2% in 2025.
“Beside consumption, gross fixed capital formation is expected to be a key driver of growth as the implementation of the Recovery and Resilience Plan supports investments. The recent natural disasters are expected to have a relatively small impact on GDP growth in 2023, since the affected areas account for a limited share of total value added.”
In terms of the inflation, the report cites a sharp decline in the first half of 2023, with the rate expected to continue decreasing, albeit at a slower pace, due to the waning negative base effect of past energy price shocks and solid wage growth amid tightening labor market conditions.
As per employment, it is projected to increase further, although at a more moderate pace in line with economic activity.
Finally, the report notes that the current account deficit has narrowed in 2023 and is expected to drop in the next years.