## Greece: Staff Concluding Statement of the 2023 Article IV Consultation Mission _IMF News, November 14, 2023_ ## Source details **Canonical URL:** [Greece: Staff Concluding Statement of the 2023 Article IV Consultation Mission](https://www.imf.org/en/news/articles/2023/11/14/greece-cs-2023) ## Other formats - [Markdown version](/en/news/articles/2023/11/14/greece-cs-2023/index.md) - [Structured JSON version](/en/news/articles/2023/11/14/greece-cs-2023/index.json) - [Bundle manifest](/en/news/articles/2023/11/14/greece-cs-2023/bundle-manifest.json) ## Bibliographic details - Published: November 14, 2023 --- ### Economic outlook — summary findings - Real GDP expanded beyond its pre-pandemic trend level. - Public debt-to-GDP ratio has declined below its pre-pandemic level; debt financing risks contained in the medium term due to favorable debt structure. - Banking system resilient with improving balance sheets. - Macroeconomic challenges: significant monetary policy tightening, persistent core inflation, rising real estate prices. - Structural impediments: low household savings, still low level of investment, structural shift from climate change weighing on medium-term growth. ### Recovery, inflation, and near-term outlook - Real GDP growth in 2023: continued to expand at a solid pace in the first half of 2023 by 2½ percent (seasonally adjusted annualized rate). - Private consumption supported by increasing real wages and gradual decline in pandemic-induced excess household savings. - Fixed investment growth robust, driven by ongoing Next Generation EU (NGEU)-funded investment. - High-frequency data: economic momentum remained robust in Q3 2023 despite natural disasters (heatwaves, wildfires, and floods). - Unemployment rate: declined to 10 percent in September (a decade low). - Inflation (October): headline 3.8 percent (y/y); core 3.6 percent (y/y) — decelerated due to normalizing energy prices and base effects but remain high amid tightening labor market. - Residential real estate prices: increased by more than 50 percent since the trough in 2017 but remain below pre-Global Financial Crisis levels. - Growth projections: - Real GDP projected to grow by 2.5 and 2.0 percent in 2023 and 2024, respectively. - Medium-term GDP growth forecast to moderate to about 1¼ percent. - Inflation projection: Headline inflation projected to reach 2 percent by end-2025 as pressures on core inflation dissipate only gradually. ### Structural reforms and medium-term growth drivers - Progress cited in digital transformation and integration of government services. - Labor market reforms: modernization of labor legislation and public employment services facilitating labor market adjustment since the pandemic. - Enhanced competition authority actions increased market competition. - Potential growth: estimated to have turned positive in 2022 for the first time since the sovereign debt crisis. - Recommendations to boost supply-side performance: - Rationalize regulations to facilitate firm entry and exit and job transitions. - Sharpen digitalization focus to serve small- and medium-sized enterprises. - Scale up lifelong learning (digital and green skills) to reduce skill shortages. - Improve availability and affordability of childcare and reduce marginal income tax of second earners to raise female labor force participation. - Strengthen judicial reforms and out-of-court proceedings to accelerate debt resolution and reduce bank NPLs. ### Banking system and financial stability - Asset quality improvement: NPL ratio declined below 5 percent in 2023Q2 in systemically important banks, supported by securitizations under the Hercules program. - Banks: higher net interest margins and strong rebound in profits bolstering capital adequacy. - Liquidity: sizable liquidity buffers maintained despite substantial repayments of ECB’s TLTRO. - Financial stability recommendations: - Strengthen monitoring and management of interest rate, liquidity and funding, and credit exposures, underpinned by a strong bank capital base. - Closely monitor and stress-test banks’ interest-rate risk, funding, and liquidity as TLTRO replacement with more expensive market funding may pose challenges. - Proactive credit risk management to maintain comfortable capital buffers; use temporarily elevated profits to build capital buffers and restore quality of capital. - Macroprudential toolkit: activate a positive neutral countercyclical capital buffer to guard against systemic shocks. - Borrower-based measures for mortgage loans—ceilings on loan-to-value ratio and caps on debt service-to-income ratio—to enhance household resilience. ### Fiscal stance and recommendations - Fiscal consolidation aim: continue growth-friendly consolidation to strengthen public debt sustainability while supporting inclusive and green growth. - Fiscal numbers: - Primary surplus projected to increase to 2.1 percent of GDP in 2024, up from projected 1.1 percent in 2023. - Maintain a primary surplus of about 2 percent of GDP in the medium term to improve public debt sustainability and provide space for domestically financed public investment and critical social spending. - Policy guidance: - Contain spending pressures, especially in non-discretionary areas such as public sector wages and pensions, which are elevated in cross-country comparison. - Protect or expand critical social spending: targeted social transfers, healthcare, and education. - Strengthen social safety net (including a single portal for benefits). - Advance fiscal structural reforms: address tax evasion (including targeted reforms for the self-employed), promote digital transactions, rationalize tax incentives, and strengthen public investment management in view of planned large NRRP investments. ### Risks and scenarios - Upside and downside risks to growth and inflation: - Downside: escalation of Russia’s war in Ukraine or conflict in the Middle East could disrupt trade and trigger renewed energy and food price pressures; higher-than-expected persistence in euro area inflation and higher-for-longer rates would weigh on demand; more frequent extreme climate events could disrupt tourism and activity. - Upside: acceleration of ambitious structural reforms and stronger-than-expected market reaction to investment grade upgrade could improve growth. - Inflation risk: could remain high from weather-related shocks and domestic pressures from recent and expected wage and pension increases. ### Climate and green transition - Climate challenge: dominance of fossil fuels in energy necessitates strong implementation of renewables policy framework. - Recommendations for green transition: - Streamline licensing for new renewables investment and better integrate renewables into the electricity grid to accelerate progress and boost energy security. - Consider raising the carbon tax (including excise and feebates) in non-ETS sectors such as transport to incentivize rapid and efficient green transition as energy prices normalize. *Greece: Staff Concluding Statement of the 2023 Article IV Consultation Mission — November 14, 2023.* --- ## References - [Greece and the IMF](http://www.imf.org/external/country/GRC/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [Mission Concluding Statements](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2023/11/14/greece-cs-2023_