Optimism as Greek economy grows, unemployment drops: OECD

The Organisation for Economic and Cooperation and Development (OECD) announced on Monday projected growth for the Greek economy by 2.3% in 2018.

According to the OECD, private consumption and investment will lead the recovery whilst exports are expected to increase due to external demands whilst a primary surplus of 2.2% of GDP is expected this year.

"Reduced uncertainty over public finances led to an increase in the country's credit rating and lower spreads on state debt, allowing the government to issue its first bond after three years" said the OECD.

Optimism is also expressed in the unemployment rate with the report suggesting a projected fall to  to 20.5 % in 2018 and to 19.5% of the workforce in 2019, from 21.7 % this year and 23.5 % in 2016.

"Surplus productive capacity is falling but remains extremely high, limiting pressures on prices and wages," the organisation said. The OECD said it expected the Greek inflation rate (harmonised consumer price index) to rise to 1.2 % this year, slowing to 1.0 %in 2018 and rising again to 1.2%in 2019, while the country's current account balance is expected to show a surplus of 0.4 % of GDP this year and in 2018 and a surplus of 0.1 % of GDP in 2019.

The budget surplus is on track to exceed the 2017 target, through improved tax compliance and restrained expenditure, the Paris-based organisation said, adding that further progress is needed in addressing tax arrears. Reducing high levels of poverty, especially among young people, remains urgent.

Greece’s high public debt and banks’ large stock of non-performing loans (NPLs) are sources of financial vulnerabilities, the OECD said. It noted that putting public debt on a stable downward path will require sustained reforms to boost potential output and additional debt restructuring. Banks' large stock of NPLs adds to risks and limits banks’ lending. Gradually curing and disposing of NPLs while ensuring banks retain sufficient capital buffers is a priority.

Lastly, public debt is expected to fall to 177.9 % of GDP this year from 180.8 % in 2016, falling further to 172.8 %in 2018 and 169.3% in 2019.