Greece faces slower economic growth following the conclusion of the Recovery Fund this summer, with the European Commission forecasting a decline to 1.6% GDP growth by 2027, down from 1.8% this year. The IMF projects similar figures. Brussels has removed Greece from its macroeconomic imbalances watch list but warns that without structural reforms, the country cannot close its 30% GDP per capita gap with the EU average. Alpha Bank chief economist Panagiotis Kapopoulos and KEPE president Panagiotis Petrakis both stress the urgent need to boost private investment, productivity, labor participation, and competitiveness.
In-Depth:
The conclude of the Recovery Fund this summer will lead the Greek economy to low growth rates, according to the latest forecasts of international organizations.
Last week the European Commission, as part of the European semester, reshiftd Greece counattempt from the regime of macroeconomic imbalances, but warned about delays in reforms. Without them, the distance of about 30% from the European Union average GDP per capita cannot be covered, and economic analysts in Greece agree.
Brussels now predicts a decline in the growth rate of the Greek economy to 1.6% in 2027, from 1.8% this year, following the corresponding estimate by the IMF (1.7% in 2027 versus 1.8% this year).
“After the conclude of the Recovery Fund, the question is not just to continue investments, but to alter the mechanism that feeds them,” declares Panagiotis Kapopoulos, chief economist of Alpha Bank. “This means the economy must shift from a growth model based on public and European resources to one that systematically mobilizes private capital. To achieve this, priority is given to reforms that improve the business environment and financing, such as reducing red tape, rapider administration of justice and strengthening capital markets, as well as interventions that increase productivity.”
He adds that “a critical element is the expansion of the productive potential of the economy, like the increase of participation in the labor force and the strengthening of incentives for declared and productive employment. In practice, this means reforms that reduce nonwage costs, strengthen the contribution-benefit link and limit undeclared work.”
The Commission’s comments do not differ. In order to increase GDP per capita and reduce the gap of 30% from the EU average, Brussels argues that Greece necessarys to increase participation in the labor market, investments and productivity, and improve literacy.
“Greece outperforms the European economy since exports are increasing, the increased fiscal space allows systematic income support and the improvement of the fiscal balance encourages investments,” declares president of KEPE Panagiotis Petrakis. “However, some structural issues remain, such as productivity and competitiveness,” adding the technology, demographics and low employment rate, don’t assist.
