The OECD has further doused hopes regarding Greek growth this year, forecasting an expansion of 1.1 percent, and stresses the need to implement reforms and for the national debt to be lightened.
The Organization for Economic Cooperation and Development wrote in its annual report on the global economy published on Wednesday that “delays in reform implementation and reaching an agreement on debt relief would weigh on confidence, hampering investment,” while adjusting its Greek gross domestic product forecast.
The 1.1 percent growth it expects contrasts with the 2.7 percent growth the budget provides for, the recent European Commission estimate for 2.1 percent and even the 1.8 percent forecast included in the midterm fiscal plan the government voted for last month.
Still, the OECD says in its Global Economic Outlook that the economy will expand by 2.5 percent. It anticipates the primary budget surplus to slide from last year’s 3.8 percent of GDP, but no lower than 2.5 percent of GDP for the next few years.
The report notes that the Greek economy is beginning to recover although uncertainty remains over the country’s growth prospects. Further progress in reforms is necessary for productivity and exports to grow, the OECD argues. It makes special reference to the reforms in the products markets and in the reduction of nonperforming loans, which could lead to more exports and investments.
It also warns that “the expansion of exports depends largely on the pace of world trade growth. Geopolitical tensions among Greece’s neighbors and a renewed large influx of refugees would pose additional risks.”
As for the national debt, the report sees it declining as a percentage of GDP, while remaining high. “Debt relief, including extending maturities and additional grace periods, would reduce vulnerabilities, increase growth and strengthen Greece’s ability to handle its debt burden,” the OECD points out, adding it would pave the way for lowering tax rates and increasing public spending.