Referring to Greece, the Paris-based organization said the country’s primary fiscal surplus will fall from 3.8 pct of GDP in 2016, but will remain at high levels, above 2.5 pct of GDP this year and in 2018.
OECD said the country’s public debt has stabilized but remained very high and demanded “additional debt relief to ensure a medium-long-term fiscal sustainability.”
“Debt relief, including maturity extension of loans and additional grant periods would reduce vulnerability, raise growth and strengthen the country’s ability to manage its debt burden. Debt relief would pave the way for participating in ECB’s bond-buy program and combined with a further progress in structural reforms and tax improvement, would allow a reduction of tax rates and greater public spending on high-quality investment programs,” the OECD noted.
The Greek labor market is improving, the report said, adding that higher demand from abroad boosted exports. The unemployment rate is projected to fall to 22.2 pct this year, from 23.5 pct in 2016 and to 20.1 pct in 2018, while investments are expected to increase further.
OECD said the inflation rate in Greece was expected to rise further boosted by recent increases in energy prices, although structural inflation will remain subdued reflecting low productive capacity.
“A further progress in combating tax evasion, expanding income tax base and controlling pension spending are very significant factors to expand significant fiscal achievements of the last few years and to liberalize funds for the necessary social assistance programs,” OECD added.