Greece’s economic outlook had improved notably, after a strong post-pandemic recovery, with economic activity remaining robust and real GDP growth projected at 2.3 percent in 2023 and 2.1 percent in 2024, according to the IMF.
This assessment was made by the International Monetary Fund’s (IMF) Executive Board Consultation with Greece for Article IV in a relevant statement released.
Following the completion of the discussions, the IMF Executive Board endorsed the assessment made by its officials without the need for a meeting, the official statement read.
The IMF predicts a real GDP growth of 2.3% in 2023 (revised from the previous 2.5%) and 2.1% in 2024 (revised from 2%). Regarding inflation, the estimate suggests a decrease from 4.2% in 2023 to 2.8% in the current year.
Private consumption is expected to be supported by real wage increases, while investments will continue to expand with the implementation of the National Recovery and Resilience Plan, backed by EU funds. The IMF estimates that core inflation will reach 2% by the end of 2025, as inflationary pressures gradually ease despite the ongoing stabilization of energy and food prices.
The banking sector has demonstrated resilience, reinforced by balance sheet consolidation, the IMP says, citing the improvement of the quality of assets, with the non-performing loan ratio falling below 5% in systemic banks. Higher net interest margins have contributed to a robust recovery in banking profits and enhanced capital adequacy.
The assessment highlighted two prominent risks for the Greek economy – the imperative for reforms and the need for further measures in specific areas. Structural reforms are deemed essential to ensure the sustainability and competitiveness of the economy. The success of these reforms is crucial for maintaining fiscal discipline, fostering a business-friendly environment, and encouraging foreign direct investment.
Sustained efforts in the digitization of public administration are also cited as a key aspect of ongoing reforms. The integration of digital technologies is expected to streamline government processes, improve efficiency, and enhance overall service delivery.
Furthermore, as noted in the report, pinpointing and dismantling barriers that hinder competition is crucial, as this would create a more dynamic economic landscape, fostering innovation and efficiency, and ultimately driving economic growth.
Productivity is also broached, as it is a result of the ongoing reforms across various sectors of the economy. In addition, by reducing bureaucratic hurdles, and fostering a competitive environment, businesses are likely to operate more efficiently, contributing to overall economic productivity.
The IMF concludes that coordinated efforts are required by the Greek government to achieve its ambitious goals for climate and facilitating the green transition. Given the dominance of fossil fuels in the energy supply, the robust implementation of the policy framework for renewable energy sources, including measures to streamline the licensing framework for new investments and better integration of renewable energy sources into an upgraded electricity grid, will accelerate progress while enhancing energy security.