Greek economic growth slowed in the first half of the year affected by external factors, the European Commission said in its autumn forecast report released on Thursday.
"Economic growth slowed in the first half of the year but is expected to remain resilient to difficulties and a weaker external environment," the European Commission said in its introductory chapter for Greece, adding: "A recovery currently underway is likely to be supported by profits in exports and fiscal policy measures aimed to strengthen investments and lower labour cost. The general government surplus is projected to reach record-levels in 2019 for the fourth successive year, facilitating a more rapid reduction of public debt. Greece is expected to achieved its agreed fiscal targets while it will also improve the quality of its finances".
The Commission noted that real GDP growth slowed to 1.5 pct in the first half of 2019 as an inadequate performance in the first quarter (1.1 pct) was the result of a decline in net exports and public spending. This was partly reversed in the second quarter (1.19 pct), but overall GDP growth remained below the 2018 average. "Despite higher available incomes through an improvement of conditions in the labour market, private consumption fell -0.1 pct in the first half of 2019 compared with the same period last year, but it is expected to accelerate in the seonc half," the Commission said. It added that a subdued economic prospect for the Eurozone economy is expected to moderate export growth.
However, it stressed that the impact could not be so strong thanks to stable profits in the market from Greek exports, while changes in taxation combined with social policy measures were expected to support investments and employment growth. in this framework, the Commission expects the Greek GDP to grow by 2.3 pct in 2020 but to slow to 2.0 pct in 2021.
Employment is projected to rise by 2.0 pct in 2019 and 2020 and to moderate in 2021, with the unemployment rate falling to 14 pct of the workforce in 2021, the report said, adding that the inflation rate was revised down to 0.5 pct in 2019 because of a reduction of VAT in the second quarter and a lower-than-expected increase in oil prices. The Commission noted that any risks to the country's economic outlook were related with "a slowdown in external demand and a persistent under-execution of the state budget on the public investment leg". "Positive prospects are related with a remarkable improvement in business and consumer sentiment, while needs to be followed by significant rise in spending. Improved access in funding and borrowing from banks will give a further boost to growth," the Commission report said.
Greece is projected to reach a record-surplus of 1.3 pct of GDP in 2019, the fourth year of surpluses, while the primary surplus is projected to reach 3.8 pct of GDP this year (the Commission noted that this forecast was based on a hypothesis that spending for PPC will be covered by the capital buffer. The report also noted that a social policy package was accompanied by measures ensuring fiscal neutrality, supported better collection of indirect taxes and revised higher spending limits. "Greece is expected to achieve its primary surplus goals in 2020 and 2021," the Commission said.