Spurring growth and investment are critical to bolster the recovery of the Greek economy, which is expected to accelerate in 2017, the Paris-based think tank said. But it warned that the refugee crisis and a slowdown in trade pose risks.
“Greece has gone through a painful adjustment and it’s still facing a challenging economic and social outlook,” said OECD Secretary General Angel Gurria in Athens before Greek Prime Minister Alexis Tsipras. “The country needs to recover growth to address such challenges.”
According to the OECD’s macroeconomic projections, Greece’s gross domestic product (GDP) is expected to grow 2 per cent in 2017 after years of negative or flat growth.
But problems still plague the Greek economy that has seen GDP decline by 26 per cent since 2007. More than 30 per cent of the population lives in poverty relative to pre-crisis income levels, compared to less than 15 per cent in 2007.
Income inequality, measured as the ratio of national income received by the top compared to the bottom tenth of the population, is around 7.
Unemployment remains around 25 per cent.
“High uncertainty related to the prolonged and sometimes protracted negotiations with its creditors and the subsequent credit crunch pushed growth again into negative territory in 2015, a year in which the government has had to pass some very painful, although inevitable, measures,” Gurria said.
The OECD official added that the Greek economy has shown some positive signs, including a smaller-than-expected contraction in 2015 and a banking system that is more stable than it has been. Last summer, at the height of Greece’s negotations with European lenders, strict capital controls crippled much of the banking sector.
Encouraging competition, broadening the tax base and cracking down on tax evasion are some of the recommendations put forward for the country in the OECD’s economic survey. Gurria also recommended public assistance programmes “to alleviate the social crisis” that would cost around 1.5 per cent of the country’s GDP.
According to Gurria, the burgeoning refugee crisis could threaten to derail Greece’s economic progress, adding that European assistance was necessary to stave off a dampening effect. Preliminary figures published by the OECD estimated the refugee influx to have cost Greece 0.4 per cent of GDP in 2015.