Greece flag Greece: Economic and Political Overview

The economic context of Greece

Economic Indicators

Due to Greece's heavy reliance on tourism and the hospitality industry, the country was among the most severely hit by the Covid-19-induced crisis. However, the Greek economy rebounded strongly and GDP reached its pre-pandemic level already in the second half of 2021. In 2023, the overall growth was estimated at 2.5% (from 5.9% one year earlier – IMF), driven primarily by consumption and net exports, while also being supported by the implementation of the Recovery and Resilience Plan (RRP) and a resilient labour market. As the post-pandemic recovery loses momentum, economic activity is poised to slow down. Nevertheless, it is anticipated that GDP growth will persist above the long-term growth potential throughout the forecast horizon, at 2% this year and 1.4% in 2025 according to the IMF (2.3% and 2.2%, respectively, as per the EU Commission). The pace of private consumption growth is expected to decelerate as pent-up demand diminishes; however, it is anticipated to stay robust due to wage growth.


The estimate for 2023 indicates that the general government deficit was relatively stable, at 1.8% of GDP. This headline balance was influenced by an enhanced primary balance, attributed mainly to the gradual discontinuation of measures aimed at mitigating the economic and social repercussions of elevated energy prices. Additionally, better-than-anticipated tax revenues, notably from value-added tax and social security contributions, contributed to this improvement. However, the positive impact was partially counteracted by heightened expenses associated with the adverse effects of recent natural disasters (i.e. Thessaly floods), with increased interest expenditure also playing a role in offsetting the overall improvement in the primary balance. In 2024, the general government deficit is forecast to decrease to 1.1% of GDP. The public debt-to-GDP ratio - at 168% of GDP in 2023 - is set to decline throughout the forecast horizon, largely driven by the increase in nominal GDP, but also helped by primary surpluses. The ratio is expected to decline to 160.2% in 2024 and to 155.7% in 2025 (IMF). Headline inflation for 2023 averaged 4.1% and should remain above 2% in the foreseeable future. The aftermath of recent floods in the Thessaly region, a significant area for agricultural production, is influencing food prices, while the foreseen robust wage growth linked to a constrained labour market is poised to exert upward pressure on prices in the long term.

During 2023, indications of labour shortages emerged in key sectors such as construction and services. As nominal wages were on the ascent and inflation decelerated, the real compensation of employees shifted into positive territory in 2023, rebounding from the contraction experienced one year earlier. For the year as a whole,the  unemployment rate was estimated at 10.8% by the IMF, and is set to decelerate to 9.3% this year and 8% in 2025, its lowest level in over a decade. According to the latest data by Eurostat, Greece has a GDP per capita of less than 40% below the EU average (estimated at USD 39,864 in 2023 by the IMF – PPP).

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 217.75238.28250.28260.45270.03
GDP (Constant Prices, Annual % Change) 5.62.02.01.91.7
GDP per Capita (USD) 20,81822,80523,96624,95325,910
General Government Balance (in % of GDP) -1.8-1.6-1.2-1.2-1.3
General Government Gross Debt (in % of GDP) 179.5168.8158.8152.0148.1
Inflation Rate (%) 9.34.22.72.12.0
Unemployment Rate (% of the Labour Force) 12.410.99.48.78.4
Current Account (billions USD) -23.39-16.54-16.34-13.87-12.08
Current Account (in % of GDP) -10.7-6.9-6.5-5.3-4.5

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Traditionally, Greece's economy has been based on agriculture, but nowadays the sector represents only 3.8% of GDP and employs 11% of the labour force (World Bank, latest data available). The country has an agricultural area of around 5,867k hectares and a forest area of 3,901k hectares (FAO). The main crops are tobacco (the third-largest European producer) and cotton. Olives - many of which are used to produce olive oil - are the country's most renowned export crop. Greece has an important sheepherding industry and the fishing sector is well developed in the coastal regions (65% of domestic production of fishery products comes from aquaculture, while the remaining 35% from fishing). In 2022, the volume of Greek aquaculture fish sales witnessed a 1% rise, and the sales value surged by 14% compared to one year earlier. The total quantity of fish sold reached 137,000 tons, worth EUR 744 million. Sea bream and sea bass comprised 92% of the sales (126,700 tons), while all other fish species collectively contributed only 8% to the total sales (10,300 tons – data Hellenic Aquaculture Producers Organization).

As a result of the country's diversification of the economy, industry has replaced agriculture as the second source of income after services, accounting for 16.8% of GDP and employing 15% of the labour force. However, its share was higher before the economic crisis of 2007 (above 20%). Manufacturing is estimated to account for 9% of GDP (World Bank). The main sectors are electronics, transport equipment, clothing manufacturing and construction. Moreover, Greece has the largest maritime fleet in the world.

The service sector accounts for 67.4% of GDP and employs 73% of the labour force. Tourism provides an essential source of income and on its own contributes to almost one-fifth of GDP (the primary sector of contribution to the national economy). The sector directly employs just below 400,000 people, accounting for 10% of total employment in the country. According to the latest figures by the Greek Tourism Confederation, in the January-October 2023 period 23 million international air arrivals were recorded (+11.5% y-o-y), while travel receipts showed an increase of 15.2% and amounted to EUR 17,919 million.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 11.4 15.3 73.4
Value Added (in % of GDP) 3.9 16.8 67.1
Value Added (Annual % Change) 1.3 4.2 6.3

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
60,9/100
World Rank:
96
Regional Rank:
44

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
6.70/10
World Rank:
42/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

 

Country Risk

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Latest Update: April 2024

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