A still-favorable growth outlook

In 2024, the Greek economy continued to expand at a much faster pace than the Eurozone (+2.2% vs +0.7% in real terms expected), helped by solid private consumption, continuing accumulation of inventories and increasing exports. Though the economy has remained resilient despite high interest rates and weaker external demand, we remain cautious over the outlook: we expect GDP to grow by +1.7% in 2025 and +1.5% in 2026.

Investment performed solidly in 2021-2022 but stabilized during 2023 and 2024, more than doubling compared to pre-Covid levels. Moreover, the inflows of Next Generation EU funds will provide some support in the coming years. Indeed, Greece is one of the major beneficiaries of the NGEU facility and is expected to mobilize around EUR36bn until 2026 and has received less than 50% of the allocated resources so far. This will create an additional impulse for public and private investment.

Private consumption proved resilient throughout the period of elevated uncertainty and surging interest rates, helped by easing inflation and recovering real incomes. Intense tourism activity in the summer also provided support to net trade in 2024; the year closed with record-breaking visitor numbers and revenues, estimated at EUR22bn, up from EUR20bn in 2023 (EUR18 billion in 2019).

Public finances have been impacted both by the pandemic and support measures related to the energy crisis. The fiscal deficit decreased further in 2023 to 1.3% and is expected to improve in 2025 before returning to a surplus in 2026, thanks to the continuation of sound fiscal policy. Fiscal discipline coupled with the high inflation environment brought public debt down from 209.4% in 2020 to 163.9% in 2023. As a consequence, Greece has seen a series of rating upgrades recently, after 13 years in the junk category. Moreover, most of the public debt remains in official hands and has secured long maturity, so rollover risks should be cushioned.

The labor market experienced a steady recovery, with the unemployment rate down to 9.0% in Q3 2024, back to levels seen before the sovereign debt crisis. The driving force behind this marked improvement has been the decline in the numbers of unemployed. With rising nominal wages and the slowdown in inflation, real compensation of employees has started to recover and support households’ purchasing power. 

Greece’s business environment has improved in recent years but remains regulated and complex. The digitalization of public services, reduction in corporate taxes, unification of the social security system and the reform of labor and product markets have helped. However, Greece also has one of the slowest court systems in Europe.  According to the OECD, Greece has one of the more restrictive and heavily regulated business environments while corruption in public administration is perceived to be still relatively high. Many of these challenges should be tackled by the NGEU-related reforms.

On 31 August 2023, Greece submitted its amended recovery and resilience plan, which includes a REPowerEU chapter. In detail, Greece’s plan is valued at EUR35.95b (of which EUR18.22b is in RRF grants and EUR17.73bn in loans, including some national resources). It is structured around 103 investment streams and 75 reforms; 38% of the plan will support climate objectives while 22% of the plan will foster the digital transition.

On the political side, under a new legislative law, the June 2023 legislative election, saw New Democracy winning – after not having reached the absolute majority in May. New Democracy secured almost 41% of the votes while Syriza lost further ground and obtained 17.8% of the votes. This means policy continuation and a strong focus on economic developments.