Greek economy to begin recovery in H2 2016, OECD report
In its six-month Economic Outlook report, the OECD forecasts that the country's GDP will contract by 1.4 pct in 2015 and 1.2 pct in 2016, returning to positive growth rates in 2017 (2.1 pct). "Recovery will strengthen in 2017, as structural reforms and a strong external demand will boost investments and job creation," the report said.
The Paris-based organization expects the Greek unemployment rate to ease to 25.2 pct of the workforce this year, from 26.5 pct in 2014, falling further to 24.8 pct in 2016 and 23.4 pct in 2017, while the inflation rate (harmonized consumer price index) to remain in negative territory this year (-0.9 pct), returning to positive ground in 2016 (0.7 pct) and 2017 (0.5 pct).
The country's fiscal deficit is expected to rise to 4.3 pct of GDP this year, from 3.6 pct in 2014 and to 7.7 pct in 2016 (including state support in a bank recapitalization plan), but to fall to 1.5 pct of GDP in 2017.
The public debt is projected to rise from 181.3 pct of GDP in 2014 to 190 pct this year and to 200 pct of GDP in 2016, easing to 197.4 pct in 2017. "A successful negotiation on reducing debt burden could cut funding needs and enhance confidence," the report said.
The current account balance is projected to show a deficit of 0.3 pct of GDP this year and surpluses in 2016 (1.2 pct) and 2017 (1.9 pct).
"While growth is critical for reducing the public debt burden on the medium-term, achieving fiscal targets was vital to limiting debt and ensuring a smooth funding for banks' recapitalization and a further restructuring of the debt," the report noted.
The OECD added that strengthening tax administration, combating tax-evasion, was a necessary element in this effort. Reforms in product markets could improve competitiveness and create new jobs, while reforms in the public sector could reduce regulatory burden and boost the ability of social programs to protect the most vulnerable.