The Greek economy remains resilient and is expected to grow at 2% this year and 2.5% in 2025 as employment and real wage growth and strong tourism boost consumption, according to the OECD's semi-annual Economic Outlook report.

Despite the slowdown in new job growth, the employment rate and labour shortages remain at historically high levels, it highlights.

Wage growth reached 5.5% in the fourth quarter of 2023 on an annualised basis, the OECD notes, with the minimum wage rising by 9.4% in April 2023 and a further 6.4% in April 2024.   The absorption of Recovery and Resilience Fund resources and continued improvement in bank soundness will support investment despite tight financial conditions, the report adds, with investment projected to grow 9% in 2025.

Inflation will continue to fall, but at a slower pace, and is projected to fall to 2.1% in the last quarter of 2025.

The forecast for a primary surplus of 1.8% of GDP this year and 2.1% in 2025 is appropriate given the high public debt, the report says, which is estimated to fall to 151% of GDP in 2025 from 161% in 2023. Economic growth and further progress in the fight against tax evasion will boost public revenues.

The report said the cost of borrowing Greek government 10-year bonds fell by 100 basis points (one percentage point) in March 2024 compared with a year earlier and the spread in the yield between Greek 10-year bonds and their German counterparts halved as Greece regained investment grade status.

The OECD stresses that the key challenges facing the Greek economy are boosting productivity and fiscal adjustment due to high debt.

It notes that sustained and strong economic growth will be needed to continue debt reduction, alongside the high spending that is necessary due to low investment during the crisis decade, an ageing population and to address climate change.

Productivity growth, which is a third lower than the OECD average, would at the same time help to create more fiscal space and raise living standards.

A precondition for productivity growth is further progress in removing barriers to investment, notably by strengthening the justice system, reducing remaining obstacles related to the regulatory framework for retail trade and liberal professions, and providing more and higher quality adult education.

The OECD notes that much of the public investment needed to support growth will need to be financed from the state budget after the termination of the Growth and Resilience Fund in 2026, notably by restraining wage spending, reducing fragmentation of public procurement, further promoting digitisation and simplification of public services, and expanding the number of taxpayers.