Thursday

11th Aug 2022

Greece to stay in recession, warns OECD

  • Still in recession. The OECD expects Greece's economy to shrink in 2014 (Photo: YoungJ523)

The Greek economy will stay in recession in 2014 for the seventh consecutive year, according to the OECD.

The Paris-based Organisation of Economic Co-operation and Development (OECD) think-tank forecasts a further 0.4 percent economic slowdown next year in its economic survey of Greece published Wednesday (27 November), lower than the 0.6 percent growth currently projected by the Greek government and its creditors.

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It also says that Greece will struggle to bring its debt burden below a massive 160 percent of GDP by the end of the decade, nearly 40 percent higher than the 124 percent expected by the European Commission.

The OECD states that a sharp fall in prices could also force Greece to seek more time and money from its creditors. Greece is currently three years into a €240 billion emergency loan programme.

"If negative inflation risks materialise, assistance from Greece's euro area partners may need to be considered," the OECD said.

Speaking in Athens on Wednesday, OECD Secretary-General Angel Gurría said that it was "imperative that both the costs and the benefits of adjustment are shared fairly” if the country's reform programme was to work.

However, Gurria was full of praise for Athens' progress in reforming its economy and particularly a “spectacular reversal in the balance of payments”.

Greece has lost more than 25 percent of its economic output since 2007 and seen its unemployment rate climb to 27 percent, the highest in the EU. Its debt pile is expected to peak at around 180 percent this year, nearly double the average across the rest of the eurozone.

The OECD report calls on the Greek government to scrap 555 regulations hindering businesses ranging from retailers to building materials sector and tourism, arguing that slashing red-tape would lead to an extra €5.2 billion in economic activity.

"A more rapid return of confidence and foreign capital, attracted by low asset prices, and privatisation, could support domestic demand through both investment and consumption," it argued.

For his part, Kostis Hatzidakis, Greece's minister for competitiveness agreed that the government would continue its programme of market liberalisation. "It is true that our economy has been plagued by bureaucracy, protectionism and market distortions for a long time," he said.

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