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OECD Forecasts Growth in Greek Economy for the Next Two Years

OECD Greek economy
OECD analysts see growth in the near future for the Greek economy. Credit: George E. Koronaios/Wikimedia Commons/CC BY-SA 4.0

The Organisation for Economic Co-Operation and Development (OECD) released its forecast for the struggling Greek economy on Monday, showing that Greece is likely to enter a period of growth over the next two years.

In its Economic Outlook Report, the OECD highlighted that the economy was projected to grow by 3.8 percent in 2021 and 5.0 percent in 2022.

The organisation said that the easing of travel restrictions is expected to support the service industry and exports. The importance of tourism to the economy means that Greece’s outlook especially reliant on successful vaccination campaigns globally.

Another factor which will likely support growth in the Greek economy is the EU-funded Recovery and Resilience Plan, which has recently increased pay-outs to Greece. These pay-outs are expected to support investment in 2021 and 2022.

Additionally, there is the hope that recent reforms will have encouraged swifter and higher-quality public spending and private business investments. Raising public administration effectiveness would help improve the investment climate and the implementation of recent reforms.

As coronavirus measures are lifted and activity gradually recovers, income support can be refocused to encourage receivers to enroll in quality vocational and new skill building programs.

OECD sees growth for Greek economy

Although these measures were a detriment to the economy, the OECD wagers that the losses the Greek economy faced due to the most recent lockdown were lower than those of last year’s lockdown.

Looking at the sectors which were most affected by coronavirus lockdowns, turnover in February 2021 was about 50 percent lower than a year earlier.

Manufacturing, particularly that of medical and pharmaceuticals products, was more robust in late 2020 and the first months of 2021. Banks have increased new lending to businesses, supported by the government’s loan guarantees and interest subsidies.

Even when taking into consideration individual households, people in Greece were more likely to increase their savings over the most recent lockdown. Excess bank deposits rose by over seven percent of the GDP in 2020.

Housing construction has also grown strongly. Overall, there was an increase in employees in the first months of 2021, as firms hired workers even as the contracts of more than 260,000 workers were suspended.

In comparison to the rest of Europe, OECD forecasts that the Greek economy will grow at a good rate. Although in 2021 Greece’s economy is expected to grow at a slower pace than the rest of Europe, as Greece faces growth 3.8 percent and Europe as a whole expands by 5.8 percent, this trend will not continue into 2022.

Next year, OECD projects that the Greek economy will grow 0.6 percent more than the rest of Europe’s. Where the European economy as a whole increases by 4.4 percent in 2022, Greece is predicted to experience a growth rate of 5.0 percent.

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