OECD: The Greek economy is expected to grow by 0.1% this year and by 2.3% in 2016

The Greek economy is expected to grow by 0.1% this year and by 2.3% in 2016, the Organization for Economic Cooperation and Development (OECD) said in its semi-annual Economic Outlook report.

The unemployment rate is projected to drop to 25.7% of the workforce this year and to 24.7% in 2016, from 26.5% in 2014, while the inflation rate will remain in negative territory in 2015 (-1.4%) before rising to 0.3% in 2016. The country’s fiscal deficit is projected to drop to 3.4% of GDP this year and to 2.8% in 2016, from 3.6% in 2014, while the public debt will rise to 187.9% of GDP this year, easing slightly to 187.6% in 2016, from 184.1% in 2014.

The OECD noted that economic growth will remain weak in 2015 because uncertainty related with the reform program and a deteriorating liquidity condition have undermined business confidence and investments. For 2016, economic growth will be more dynamic and unemployment will ease as exports and investments are projected to recover along with a reform effort, although the economy will remain in a deflation trend this year.

“The debt burden will remain very high and fiscal sustainability demands the continuation of restrain policies for some time. Fiscal policy must focus on a small primary surplus. Reforming the tax system and tax collection are necessary to boost revenues, while further reforms on the pension system could hep in containing spending,” OECD said in its report.

“Structural reforms to reduce hurdles in competition and investments could boost exports and create more high-quality jobs, while reforms in social policy must focus on a fair distribution of costs and benefits from an adjustment policy. Investment recovery will depend on the return of business confidence and the rate of implementing structural reforms. It is necessary to improve access to credit, that is why it is crucial to stabilize the banking system and resolve the non-performing loans issue,” it noted.