Greece must grow faster to meet primary budget targets

Significance

Ahead of the elections, public attention was firmly focused on the state of the economy, particularly budget execution and foreign direct investment (FDI). The issue of social justice, which dominated the 2015 elections, has been replaced by a sense of the need to develop a credible economic growth strategy.

Impacts

• To encourage domestic investment, from 2020, the new government is likely to offer fiscal stimuli, such as super-depreciation of investment.
• Reducing the stock of NPLs will present the biggest challenge going forward.
• Raising Greece’s credit rating to investment grade is necessary for full access to international capital markets.
• Minimum wage increases may weigh on firms’ profit margins, limiting investment.