Economic and Political Overview

flag Greece Greece: Economic and Political Overview

In this page: Economic Outline | Political Outline | COVID-19 Country Response

 

Economic Outline

Economic Overview

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, Latest data available.

Note : (E) Estimated data

 

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 data available.

 

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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

See the country risk analysis provided by Coface.

 

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Political Outline

Current Political Leaders
President: Katerina Sakellaropoulou (since 13 March 2020)
Prime Minister: Kyriakos Mitsotakis (since 26 June 2023)
Next Election Dates
Presidential: February 2025
Parliamentary: 2027
Current Political Context
The incumbent centre-right and liberal party New Democracy (ND) triumphed in the June 2023 elections, clinching 40.6% of the vote and securing 158 out of 300 parliamentary seats, including the 50 bonus seats awarded to the majority. Prime Minister Kyriakos Mitsotakis has thus obtained a second mandate to continue implementing an EU-backed reform and modernization agenda, encompassing initiatives like the electrification of the auto fleet, digitization of public services, upskilling of the labour force, and enhancing energy efficiency in homes. Opposition parties experienced widespread weakening, with the left-wing Syriza achieving the lowest result for a main opposition party in modern Greek democracy with 17% of the votes.
In the realm of geopolitics, a significant challenge lies in effectively handling tensions between Greece and Turkey, as the maritime claim disputes in the Aegean and Eastern Mediterranean seas persist, alongside concerns related to refugee management.
Main Political Parties
The main political parties/alliances currently represented in the Greek parliament include:

- New Democracy (ND): centre-right. ND's policies are based on free-market economics and social conservatism. It obtained 158 seats thanks to the majority bonus system
- Coalition of the Radical Left (SYRIZA): left-wing anti-establishment, populist, anti-austerity (47 seats)
- Movement For Change (PASOK-KINAL): centre-left; it is a breakaway faction from SYRIZA that was formed in 2021
- Communist Party of Greece (KKE): Marxist-Leninist, the oldest party in Greece
- Spartans: far-right political party, it has strong connections with the extreme-right Golden Dawn
- Greek Solution: right-wing, ultranationalist. It was formed in 2016 by former Golden Dawn MP Ilias Kasidiaris
- Democratic Patriotic Movement (Victory): conservatism, Christian nationalism
- Course of Freedom: anti‑establishment, left-wing populist.

Type of State
Greece, officially known as the Hellenic Republic, is a republic based on a parliamentary democracy. Though a monarchy until 1974, Greece today is a constitutional state.
Executive Power
According to the Constitution, executive power is exercised by the President of the Republic and the Government. The role of the President in the executive branch has been reduced to ceremonial since 1986. The post of Prime Minister, Greece's head of government, belongs to the current leader of the political party that can obtain the confidence of a parliamentary majority. The President of the Republic formally appoints the Prime Minister and, on his or her recommendation, appoints and dismisses the other members of the Cabinet. The Prime Minister exercises vast political power and the amendment of 1986 further strengthened their position to the detriment of the President of the Republic.
Legislative Power
Legislative power is exercised by a 300-member unicameral Parliament. Statutes passed by the Parliament are promulgated by the President of the Republic. Parliamentary elections are held every four years, but the President of the Republic is required to dissolve the Parliament earlier on the proposal of the Cabinet, when faced with a national issue of exceptional importance. The President is also required to dissolve the Parliament earlier than scheduled if the opposition succeeds to pass a motion of no confidence.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
70/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
1/7
Civil Liberties:
2/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
The summary of the EU’s economic response to the COVID-19 pandemic is available on the website of the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) in Greece, please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

 

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Latest Update: July 2024