After significant reforms, Greece’s recovery from deep economic depression is finally gaining traction, according to the OECD: Economic growth is picking up, led by exports, fiscal credibility has improved, labour market reforms have improved competitiveness and are helping to create long-awaited jobs and GDP growth is projected to strengthen, remaining above 2 percent in 2018 and 2019. In its latest Economic Survey of Greece, the OECD recognises the remarkable reform effort of the past two years. The study highlights that the credibility of public finances has markedly strengthened, after an unprecedented fiscal consolidation, boosting investors’ confidence in the country’s prospects.
Despite these positive developments, unemployment, poverty and inequality remain high, wages are low, investment remains depressed and productivity keeps falling. At the same time, the public administration is still facing important efficiency challenges, and while tax collection has improved, avoidance is widespread, resulting in high rates and narrow bases. Addressing these and other challenges will crucially depend on the continuation of the reform effort and strengthening reform ownership.
Presenting the survey in Athens, April 30 to the Greek Prime Minister Alexis Tsipras, OECD Secretary-General, Angel Gurría said that ."Greece's efforts are vindicated. The foundations have been laid for a sustainable and equitable growth, in the long-term," said Gurria and congratulated the Greek prime minister: "Congratulations Mr. Prime Minister, you have brought Greece back from the edge of the precipice." Greek Prime Minister Alexis Tsipras noted thatIn the last three years Greece has become a champion in reforms, not only in Europe and the eurozone but also among the countries of OECD.
“The reforms undertaken by Greece have finally started to bear fruit. It is an impressive achievement. With strengthened public finances and a much improved macroeconomic framework, addressing poverty and raising living standards is a priority.” Gurría added.
To achieve this, it will be essential to reduce vulnerabilities, the report says. High levels of public debt and bad loans in the banking system make Greece’s economic outlook highly sensitive to shocks. Additional public debt restructuring, as needed, and continuing to reduce banks’ non-performing loans, would diminish such vulnerabilities and boost confidence.
It will also be crucial to support job creation and thus reduce poverty. Although employment is recovering, a growing share of jobs has been temporary or part-time work, resulting in many workers earning less than the minimum wage. Improving workers’ skills and ensuring they match workplace needs while strengthening firms’ incentives to invest and innovate are vital to raising wages and reducing worker poverty. The OECD recommends introducing sectoral collective wage bargaining covering broad working conditions while maintaining the flexibility of the current wage-bargaining system so that agreements can adapt to different types and sizes of firms. Continuous vocational training is also essential to improve workers’ ability to find work and raise their income.
The survey states that the 2017 and 2018 reforms that consolidate and strengthen family benefits are crucial in improving the targeting of programmes to those in need. The roll-out of the guaranteed minimum income and the provision of school meals are also important steps to better protect poor households. The survey also says the government needs to build on recent reforms to revive investment. The new Investment Incentives Law and the ongoing design of a National Growth Strategy will increase the level of investments. The survey further calls for further easing of product market rules while improving the quality and transparency of regulation. Continuing to fight corruption, enhance the public administration and tackling informality would improve the business environment, strengthen the rule of law and increase trust in government.
Overview of the Economic Survey, with the main conclusions, is freely accessible on the OECD’s web site at: http://www.oecd.org/greece/economic-survey-greece.htm.