Economic Outline

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. Economic activity grew by 2.3% year-on-year in 2024, mainly driven by domestic demand, though net exports held back growth. Minimum wage hikes boosted private consumption, especially for lower-income households with higher consumption rates. Equipment investment accelerated alongside strong corporate credit growth, while a rise in imports and slow export growth led to a decline in net exports. The IMF expects real GDP growth to stay strong at 2.1% in 2025 before moderating in the medium term. Investment will remain a key driver, supported by NGEU-funded projects, while private consumption growth should stay robust, driven by positive employment and income growth.

Concerning public finances, the headline deficit decreased from 1.3% of GDP in 2023 to 0.6% of GDP in 2024, reflecting an increase in the primary surplus from 2.1% of GDP in 2023 to 2.9% in 2024. This decline was largely due to slow growth in current expenditure and higher income tax revenues. In 2025, the headline deficit is expected to further reduce to 0.1% of GDP, mainly driven by lower interest expenditure due to declining short-term interest rates. The primary surplus is projected to remain high at around 2.5% of GDP in 2025, as reduced revenue from an additional cut in social security contributions is largely offset by revenue gains from reforms targeting tax evasion and improving compliance. By the end of 2024, the public debt-to-GDP ratio is expected to have fallen by over 50 percentage points from its 2020 peak (to around 159%), driven by strong growth, high inflation, and significant fiscal consolidation. The banking system has strengthened its resilience with improved asset quality and capital adequacy. Asset quality in systemically important banks continued to improve, with the NPL ratio falling to around 3% in Q3 2024, aided by a government-backed securitisation framework. Banks maintained high profits, which, along with capital instrument issuances, enhanced capital adequacy, though there is still potential for further strengthening of voluntary capital buffers (IMF). Disinflation is progressing gradually, with headline and core inflation at 2.9% and 3.4% (y/y) at the end of 2024, respectively, amid ongoing services inflation and wage growth. With global energy prices stabilising, headline inflation is expected to continue its downward trend, while core inflation is likely to remain more persistent due to services inflation and wage growth (IMF).

The unemployment rate dropped to 9.5% (seasonally adjusted) in Q3 2024, the lowest since 2009, while the vacancy rate increased, indicating labor shortages in sectors such as construction, tourism-related services, and high-skill industries. The labour force participation rate has gradually risen but remains one of the lowest in the EU, particularly for women. According to the latest data by Eurostat, Greece’s GDP per capita is one-third lower than the EU average (estimated at USD 43,800 in 2024 by the IMF – PPP).

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