The Greek economy will grow by 2.2-2.5 pct this year, boosted by larger investment activity, higher credit expansion, tax cuts to enterprises, privatizations and concessions, a new increase in Greek exports (5.5-6.0 pct) and an 1.4 pct recovery in private consumption, the Foundation for Economic and Industrial Research (IOBE) said in its quarterly report on the Greek economy. It also estimated a further decline in unemployment to 15.5 pct of the workforce.
Presenting the report, professor Nikos Vettas, director general of IOBE, said the Greek economy was at a stage of accelerating real growth, with economic growth for 2019 estimated slightly above 2.0 pct, rising to 2.2-2.5 pct for the current year. He noted that consumer confidence and economic climate in general rose to 20-year and 12-year highs, respectively, the financing cost for the Greek state de-escalating, followed by a gradual decline in the private sector. Significant sectors, such as tourism, continue their positive contribution, while others like construction recovered from a multi-year slump, Vettas said. Exports continue moving higher, he noted, adding that 2021 will be the first year, after a decade, when the Greek economy will be focusing on future challenges instead on problems inherited from the past.
He underlined, however, that this course will not be easy or without hurdles and difficulties. There are structural problems, a weak production base and a high external public debt. Despite an adjustment effort, the economy still faces a low rate of innovation, small participation of the manufacturing sector in the country’s GDP and low productivity. Investments in the country remained around half of the levels required to converge with the other economies in the Eurozone, he said.
"It would therefore be very useful to understand that the process of strengthening the economy is not complete, nor will it develop automatically. Targeted policies will be necessary across the board, particularly in the systems of taxation, pensions and education. The goal must be to systematically increase wages and entrepreneurship in the country," Vettas said.
The IOBE official also noted that recent interventions made a taxation system even more progressive and maintain a very heavy burden on a relatively small percentage of the population which pays taxes. He urged actions lowering social insurance contributions on wage labor and strengthening flexibility and reciprocity of pensions.