OECD Forecasts Modest Growth for Greek Economy by 2026, but Warns of Risks

The Hellenic Parliament. Photo © Aliki Eleftheriou

Greece’s economy is projected to see modest growth over the next few years, with GDP expected to increase by 2.3 percent in 2024, dip slightly to 2.2 percent in 2025, and then rise to 2.5 percent in 2026, according to the latest Economic Outlook from the Organization for Economic Cooperation and Development (OECD).

The OECD’s December 2024 preliminary report highlights Greece as one of the few countries to receive an upgrade in its per capita GDP projections. Rising disposable income, a tight labor market, and wage increases are expected to boost domestic consumption.

Economic forecasts and key factors

For Greece, the OECD forecasts the following:

• Employment growth: Employment is expected to continue growing, though at a slower rate due to rising labor costs.
• Investment: EU Recovery and Resilience funds are projected to stimulate a surge in investment, with public spending in support of growth expected to rise from 1.8 percent of GDP in 2024 to 3.6 percent by 2026.
• Inflation: Inflation is anticipated to decrease to around 2 percent by late 2026, driven by stable core inflation and ongoing wage growth.
• Fiscal outlook: A primary surplus of 2.4 percent of GDP in 2025 and 2026 is expected, contributing to a further reduction in the country’s debt-to-GDP ratio, which is projected to reach 148.1 percent in 2026.

Additionally, the minimum wage has increased by 42 percent since 2018, with further hikes of around 4.6 percent expected in both 2025 and 2026. Public sector wages, which were previously frozen, will also be raised to align with these increases.

Risks to growth

Despite the positive outlook, the OECD warns of potential challenges that could dampen Greece’s prospects:

• Recovery and Resilience Plan: Delays in implementing the “Greece 2.0” Recovery and Resilience Plan could jeopardize expected investment growth.
• Wage-productivity imbalance: If wages continue to outpace productivity, Greece’s exports may be negatively impacted.
• Extreme weather events: Events like the 2023 floods in Thessaly could further strain domestic demand.
• Public debt management: Maintaining a clear path toward reducing public debt remains critical, especially as aging costs and future investment needs add to spending pressures.

The OECD recommends that the Greek government continue improving the efficiency of public spending, focusing on sectors such as education, healthcare, and investment, to support long-term growth and equity.

Current economic data

As of the second quarter of 2024, Greece’s real GDP grew by 1.6 percent, driven by strong capital formation and consumption. Employment rose by 1.6 percent year-on-year in September 2024, and nominal wages increased by 8.6 percent over the same period, reflecting continued labor shortages.

Inflation, however, remains persistent, with headline inflation at 3.1 percent in October 2024 and core inflation at 4.3 percent, primarily due to services inflation.

Global economic overview

The OECD’s report also addresses the global economy, noting its resilience despite the challenges of the pandemic and energy crisis. Global GDP growth is forecast to remain stable at 3.2 percent in 2024, with inflation gradually falling towards central bank targets.

However, the report also highlights risks such as geopolitical instability, protectionism, and potential disruptions to global trade.

In the United States, the world’s largest economy, GDP growth is expected to slow from 2.8 percent in 2024 to 2.1 percent by 2026.