"The outlook for the Greek economy for 2024 and 2025 remains favourable, with forecasts for faster growth compared to the Eurozone, despite high uncertainty at the international level," the quarterly report of the Hellenic Parliament's Budget Office stresses, according to Athens News. Agency.
At the same time, it is noted that "the Greek economy seems to have developed resilience, mainly due to manufacturing and exports, which are emerging as critical growth drivers, along with investment and consumption.".
However, the Office considers that challenges remain and they have to do with the investment gap, climate change, and the demographic problem, which are important issues for the future.
The head of the Budget Office, Professor Yannis Tsoukalas, in response to a question, said that the revenue from the fight against tax evasion amounts to €870 million.
At the same time, the report noted that "the Greek economy continued its upward trajectory for the second consecutive quarter, recording a strong growth rate, according to provisional data from ELSTAT for the second quarter of 2024. Gross domestic product (GDP) grew by 2.3% compared to the corresponding quarter of 2023, surpassing the Eurozone average of 0.6%. This increase is mainly attributed to the strengthening of investment, exports, and private consumption."
FORECASTS
The Bureau's revised forecast for the Greek economy's annual growth rate for 2024 stands at 2.3%, slightly lower than the previous estimate of 2.5%, as published in the June report. Despite the revision, the outlook remains positive, with the range of estimates ranging from 2.1% to 2.7%. These estimates are in line with the forecasts of international organisations such as the European Commission, the International Monetary Fund, and the Bank of Greece.
The new National Medium-Term Fiscal Plan, submitted in September 2024, estimates the Greek economy to grow at 2.2% for the year. An important factor for long-term growth, according to the Bureau, is investment in fixed and human capital, which boosts productivity. To achieve this goal, the Greek economy needs to shift its production model towards high value-added sectors, which will enhance its international competitiveness.
MANUFACTURING ACTIVITY
An important sector examined in this report is manufacturing, which has recovered significantly in recent years. Manufacturing's contribution to GDP stands at 10.4% in the second quarter of 2024, up significantly from 8.6% in 2009. Manufacturing is the only sector of the Greek economy in which labour productivity has not only returned to pre-crisis levels but has exceeded them. In particular, labour productivity in this sector has increased by 43% from the first quarter of 2009 to the second quarter of 2024. The export-oriented nature of the sector, with 29.3% of exporting firms coming from the sector and accounting for 68.1% of the country's total exports (2022 data), plays a key role in its high performance. Manufacturing firms engaged in exports have higher productivity due to increased international competition, which creates incentives for innovation and cost containment.
Another reason for the recovery in manufacturing is the increased investment in the sector, mainly from the Recovery and Resilience Fund (RDF). According to the Bank of Greece, investment in manufacturing increased significantly in 2021-2022 due to inflows from the RDF, leading to a 5.5% increase in the sector's value added in 2021 and a further 7% in 2022. Research and development spending is also significant, which in the manufacturing sector is more than double as a share of value added (10.8% compared to 3.1% in the economy as a whole in 2021). Moreover, the average wage in the manufacturing sector is significantly higher than the average wage in the economy as a whole, due to increased productivity.
Strengthening the manufacturing sector emerges as an important pillar for achieving long-term growth and for diversifying the Greek economy, adding a third pillar of growth beyond tourism and shipping. This diversification enhances sustainable economic growth, while the increase in productivity in the manufacturing sector helps to keep prices down, to the benefit of consumers.
FISCAL FRONT
On the fiscal front, the consolidated General Government Primary Result for the eight months January-August 2024 shows a surplus of EUR 8.232 billion, an increase of EUR 3.943 billion compared to the corresponding eight months of 2023. The primary surplus amounts to 3.5% of GDP. This improvement is attributed to a number of factors, such as increased tax revenues due to improved employment and higher wages, stronger tourism revenues, which increased by 5.6% in the seven months of 2024 compared to 2023, and an increase in electronic transactions as a result of measures implemented, such as the interconnection of cash registers with POS.
Also important for fiscal stability is the introduction of the new EU economic governance framework, which entered into force in April 2024. This new framework focuses on realistic debt reduction and the containment of budget deficits in times of growth to ensure fiscal space to deal with crises. In this context, each Member State will submit medium-term budgetary plans in cooperation with the European Commission, while net primary expenditure will be subject to strict controls, taking into account the characteristics of each country.
Greece's new Medium-Term Fiscal Plan foresees an average annual increase in net primary expenditure of €3.5 billion over the period 2025-2028. This plan also includes a coherent program of investment and reforms, partly financed by the EIF, and the enhanced national public investment program, aimed at growth and income growth. On this basis, debt as a percentage of GDP is expected to fall to 133.4% in 2028 and 114.9% in 2038.
Finally, as noted, regarding inflation, the Harmonised Index of Consumer Prices for August 2024 shows a slight increase to 3.2%, compared to 3.0% in July, while food inflation fell to 2.0%. This decline in food inflation is attributed to measures to strengthen competition and lower international commodity prices.
