A substantial comparative advantage for the Greek economy vs many eurozone countries in the current phase lies in the positive situation of public accounts. While still burdened by a high debt-to-GDP ratio (likely around 155% in 2024), Greece can already boast a very low level of deficit (around 0.8% of GDP in 2024). Last year, Greece fiscally overperformed on the back of government underspending and rising tax revenues and posted a primary surplus at around 2.5% of GDP. This reflected a restrictive fiscal stance, entailing a fiscal drag of around 0.5% of GDP on the year.
Based on the budget, the Greek fiscal stance is expected to turn almost neutral in 2025, which is good news for growth resilience. This should not jeopardise a further decline in the debt to GDP ratio to about 148% in 2025, in our view.
The main reason for concern for 2025 is the abnormally high contribution to GDP growth from inventory accumulation seen in 2024. Its normalisation could subtract substantially from yearly growth, possibly unmatched by other components.
All in all, we continue to believe that Greece will remain a growth overperformer in the euro area context. However, we suspect that in 2025, the growth pace might slightly decelerate, with average growth at around 1.7%.