Growth in Greece will amount to no more than an anaemic 0.1 percent this year, according to the Organization for Economic Cooperation and Development, which in its latest report has revised its forecast for the Greek economy down from 2.3 percent six months ago.
However, even that marginal growth, warned the OECD, depends on Greece reaching an agreement with its creditors, as the lack of a satisfactory deal would lead to “a significant contraction of output and income of households.” The big challenge for the Greek economy remains the implementation of reforms, and any failure will lead to a contraction in gross domestic product.
The forecasts issued yesterday are much lower than those published in November, when the OECD anticipated 2.3 percent growth for this year and a 3.3 percent expansion in 2016. Now it expects the 2015 GDP to grow just 0.1 percent before the economy expands 2.3 percent next year.
According to the OECD, the targets for investment and strengthening consumption have been undermined by the credit conditions and the low confidence in the economy, while the benefits from the increase in competitiveness will not be enough to push exports forward unless they are accompanied by structural reforms to lift the barriers to commerce and investments.
Albeit on a downward course, unemployment will remain on a high level this and next year, at 25.7 percent in 2015 and 24.7 percent in 2016 (against previous forecasts for 25.2 percent and 24.1 percent respectively), while deflation will persist this year before inflation returns in 2016.
The country’s debt will also remain high, at 180 percent of GDP this year and 178.1 percent in 2016, against previous estimates for 174.3 percent and 171.4 percent respectively. The fiscal policy should aim at a much lower fiscal outcome, for a deficit of 3.4 percent of GDP this year and 2.8 percent in 2016, while a key point will be the reform of the tax system and the tax collection capacity, to ensure an increase in state revenues.