Presentation of the 2018 OECD Economic Survey of Greece

OECD ECONOMIC SURVEY OF GREECE 2018

Achieving an inclusive and sustained recovery 30 April 2018, Athens http://www.oecd.org/eco/surveys/economic-survey-greece.htm @OECDeconomy @OECD

The economy is finally recovering Real GDP Annual % change

Annual % change

8

8

6

6

4

4

2

2

0

0

-2

-2

-4

-4

-6

-6

-8

-8

-10

-10

2001

2003

2005

2007

2009

2011

2013

Source: OECD (2018), OECD Economic Outlook: Statistics and Projections (database).

2015

2017

2019

2

Unemployment is falling Unemployment rate % 30 27

24 21 18

15 12 9

6 3 0

2001

2003

2005

2007

2009

2011

2013

Source: OECD (2018), OECD Economic Outlook: Statistics and Projections (database).

2015

2017

2019 3

Competitiveness has improved Relative unit labour costs Index, 2010=100 120 Greece Euro area

110

100

90

80

70

2000

2002

2004

2006

2008

2010

2012

Source: OECD (2018), OECD Economic Outlook: Statistics and Projections (database).

2014

2016 4

The fiscal situation is strengthening % of GDP 6 4

Primary budget surplus Government primary balance

ESM programme target

2 0 -2

-4 -6 -8 -10 -12

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Note: The primary balance definition is different from that used in the ESM Support Stability Programme.

Source: OECD (2018), OECD Economic Outlook: Statistics and Projections (database) and EC (2018) Compliance Report ESM Stability Support Programme for Greece

5

Structural reforms have been extensive Reforms implemented

Ongoing reforms

Reforms to do

Spending reviews

Public administration and financial management

Further product market liberalisation

Corporate law

Anti-corruption

Insolvency procedures

Judiciary

Public administration and judiciary for rule of law

E-auctions, loan servicing bodies and secondary market

Capital controls

Tax compliance

Out-of-court workout Opening protected markets Targeted social protection for low income families State asset management and concessions

Regulation impact assessments

Complete land registry Logistics and transport plan

Pensions

Arrangements for agreeing pay and work conditions

Rationalise social benefits and administration

Minimum wage commission

Housing and disability allowances

Active labour market programmes for re-training and job matching School management

In-work benefits for low wages Certify professional education

Expand active labour market and family programmes Raise effective retirement age 6

Productivity continues to decline Labour productivity

Index, 2010=100 115 Greece Euro area

110

OECD 105 100 95 90

85

2000

2002

2004

2006

2008

2010

2012

Source: OECD (2018), OECD Economic Outlook: Statistics and Projections (database).

2014

2016 7

Investment fell sharply during the crisis Real investment Index, 2017=100 120

Index, 2017=100 120 Greece

Euro area

100

100

80

80

60

60

40

40

20

20

2007

2008

2009

2010

2011

2012

2013

2014

Source: OECD (2018), OECD Economic Outlook: Statistics and Projections (database).

2015

2016

2017

8

Poverty is very high, especially among the young % 30

Severe material deprivation rate Greece, 2016

EU, 2016

2009

% 30

25

25

20

20

15

15

10

10

5

5

0

0

Total

Under 18

Source: Eurostat (2018), EU Statistics on Income and Living Conditions (database).

9

Boosting inclusive and sustainable growth

10

Deeper reforms would boost growth Impact of structural reforms on level of GDP Index, 2017=100 240 Legislated and ongoing reforms Deeper reforms to product markets and public administration

Index, 2017=100 240

200

200

160

160

120

120

80

80

2000

2005

2010

Source: OECD calculations

2015

2020

2025

2030

2035

2040

2045

2050

2055

2060 11

Additional reforms and debt restructuring would reduce public debt General government debt

% of GDP 220

% of GDP 220

Legislated and ongoing reforms Deeper reforms to product markets and public administration Deeper reforms + debt restructuring*

200 180

200 180

160

160

140

140

120

120

100

100

80

80

60

60

40

40

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

2055

* Official creditor interest rates fixed at 2% from 2020 and ESFS repayments postponed until 2031.

Source: Calculations based on OECD (2018), OECD Economic Outlook: Statistics and Projections (database).

2060

12

Tax collection is improving but remains low VAT revenue ratio 100

%

% 2015

100

2013 80

60

60

40

40

20

20

0

0

MEX ITA GRC TUR ESP POL GBR BEL FRA IRL CAN PRT AUS NLD SVK LVA ISL FIN OECD DEU NOR DNK SWE CZE AUT SVN HUN ISR KOR CHL CHE JPN EST LUX NZL

80

Source: OECD (2016), Consumption Tax Trends 2016: VAT/GST and Excise Rates, Trends and Policy Issues, OECD (2018), OECD Revenue Statistics (database) and OECD National Accounts Statistics (database).

13

Spending efficiency can improve Use of performance budgeting 0.7

0.6

0 to 1 (highest), central government 2016

2011

0.7

0.6 0.5

0.4

0.4

0.3

0.3

0.2

0.2

0.1

0.1

0

0.0

ESP SVK ISL HUN PRT ISR LUX ITA USA TUR LVA JPN NOR NZL DEU POL GRC AUS CZE BEL CHL OECD IRL SVN DNK FRA EST NLD CAN FIN SWE CHE AUT GBR MEX KOR

0.5

Source: OECD (2016), Survey of Performance Budgeting and OECD (2017), Government at a Glance 2017.

14

Disposing less waste in landfills would improve well-being Municipal waste treatment % of treated 100

80

Recycling and composting

Incineration

Recycling and composting

60

\ 40

Landfill Landfill

20

0

Greece

Source: OECD (2017), Green Growth Indicators (database).

OECD 15

Main recommendations Boosting inclusive and sustainable growth  Maintain the reform momentum focusing on implementation, enhancing public administration efficiency and continuing to fight corruption  Maintain the primary surplus agreed with official creditors and facilitate debt restructuring as needed.  Reduce tax evasion by extending the use of risk analysis, targeted tax audits and strengthening incentives for voluntary tax compliance.  Extend the obligation of having an electronic cash register to all self-employed and introduce e-invoicing.

 Undertake regular spending reviews and extensive use of performance budgeting.  Enforce EU standards for waste disposal and urban waste-water treatment.

More in the Assessment & Recommendations 16

Expanding employment, reducing poverty and improving skills

17

Wages are moving in line with productivity Index, 2014Q1 = 100 150 Real wages

140

Productivity

130 120 110 100 90

Main labour market reforms 2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: OECD (2018), OECD National Accounts Statistics (database) and Eurostat (2017), Labour Market Statistics (database).

18

The minimum wage is near the OECD average Ratio of full-time minimum wage to median wages 2016 or latest 0.8

0.6

0.4

0.0

USA MEX ESP CZE JPN EST NLD IRL CAN DEU SVK GRC GBR BEL KOR LVA HUN AUS POL LUX ISR PRT SVN FRA NZL CHL TUR

0.2

Source: OECD (2018), Labour Statistics (database)

19

Many employees earn below the minimum wage Number of employees earning different wages September 2017

Employees, thousands 200

Employees, thousands

652

200

Poverty line for a single adult (EUR 313)

160

160

Full-time gross monthly minimum wage (EUR 586)

120

120

Median salary

10 000+

6000-7000

2950-3000

2750-2800

2550-2600

2350-2400

2150-2200

1950-2000

1750-1800

1550-1600

1350-1400

0

1150-1200

0

950-1000

40

750-800

40

550-600

80

1-400

80

Gross monthly wage, EUR Source: OECD calculations based on the ERGANI database from the Greek Ministry of Labour, Social Insurance and Social Solidarity, and Eurostat (2017), EU Statistics on Income and Living Conditions (database).

20

Poverty is highest among the unemployed Population at risk of poverty or social exclusion 18 year-olds and over

%

%

80

2016

2008

80

60

60

40

40

20

20

0

0

Total

Employed

Retired

Source: Eurostat (2018), EU Statistics on Income and Living Conditions (database).

Unemployed

21

Pensions dominates social protection spending Social protection spending by function 2015 or latest

% of GDP 40 Pensions

% of GDP 40

Family, healthcare and other 32

24

24

16

16

8

8

0

0

IRL TUR ISL LUX EST LVA SVK CZE HUN DEU POL NOR ESP SVN BEL CHE NLD DNK GBR SWE FIN PRT AUT FRA ITA GRC

32

Source: Eurostat (2018), Social Protection Statistics (database).

22

Recent reforms raise poor households’ income Income of an unemployed couple with children % median disposable income 60 Social assistance Housing allowances 50 Poverty threshold (50 % of median) 40

% median disposable income 60 Family benefits Taxes 50 40

30

30

20

20

10

10

0

0

-10

Pre-reforms

Social Solidarity Family benefits Income & tax reforms introduced introduced

Source: OECD calculations based on the OECD tax-benefit model.

Proposed housing allowance

OECD average

-10

23

Graduation rates are high Upper secondary graduation rates Under 25 years old, 2015 100

Vocational programmes General programmes

%

80 60 40 20 0

Greece

Source: OECD (2017), OECD Education at a Glance 2017: OECD indicators

OECD 24

School students’ performance lags Mean PISA score 2015

510 Greece

OECD

500 490 480

470 460 450 Source: OECD, PISA 2015 databases.

Reading

Mathematics

Science 25

Few adults re-skill through life-long learning Participation in education and training % 25-64 year olds 35

2017

% 25-64 year olds 35 30

25

25

20

20

15

15

10

10

5

5

0

0

Slovakia Poland Greece Turkey Ireland Hungary Latvia Belgium Italy Germany Czech Rep. Spain Portugal EU Slovenia United Kingdon Austria Estonia Luxembourg France Netherlands Norway Iceland Finland Denmark Sweden Switzerland

30

Source: Eurostat (2017), Education and training (database).

26

Skill mismatch is high Share of workers whose skills do not match their job 45 40

%

%

2015 Over-skilling

Under-skilling

45 40

35

30

30

25

25

20

20

15

15

10

10

5

5

0

0

POL CAN BEL SWE USA FRA NLD DNK JPN FIN EST KOR GBR SVN NOR SVK TUR OECD AUS DEU ISR AUT NZL IRL CZE ESP ITA GRC CHL

35

Source: Adalet McGowan, and Andrews (2017), "Skills Mismatch, Productivity and Policies in New Zealand: Evidence from the second wave of PIAAC", OECD Economics Department Working Papers. OECD calculations based on Survey of Adult Skills (PIAAC).

27

Main recommendations Expanding employment, reducing poverty and improving skills  Introduce collective-wage bargaining covering broad working conditions and without automatic extensions  Ensure collective agreements are sufficiently flexible so that they can be adapted to specific firm level conditions  Establish a commission of social partners and independent experts to recommend minimum wage adjustments  Introduce assessment frameworks and professional development schemes; gradually give schools and teachers greater pedagogical and managerial autonomy  Scale up post-secondary vocational education and adult education, linking them with labour market needs, and certify the quality of courses  Evaluate reskilling programmes, expand successful and cost-effective approaches and cancel those that are not.  Continue spending reviews to reallocate resources to targeted social programmes.  Further rationalise remaining non-targeted programmes.

 Consider introducing in-work benefits.

More in Chapter 2: Generating employment, raising incomes and addressing poverty

28

Boosting investment and tackling nonperforming loans

29

Banks’ non-performing loans are high Non-performing loans relative to total gross loans and advances

Source: European Banking Authority (2018),"Risk Dashboard, Data as of Q3 2017".

GRC

PRT

SVN

0

ITA

0

IRL

10

ESP

10

EU

20

AUT

20

SVK

30

FRA

30

BEL

40

LVA

40

DNK

50

NLD

50

GBR

%

EST

%

30

Lending to businesses remains weak Bank credit to non-financial corporations EUR billion 140

EUR billion 140

120

120

100

100

80

80

60

60

40

40

20

20

0

0

2006

2007

2008

2009

Source: ECB Bank Lending Survey.

2010

2011

2012

2013

2014

2015

2016

2017

31

Capital is trapped in zombie firms Share of capital in zombie firms 30

%

2013

%

30

25

25

20

20

15

15

10

10

5

5

0

0

SVN FRA JPN FIN GBR AUT KOR SWE DEU LUX PRT BEL ESP ITA GRC

Note: “Zombie” firms are 10 years or older with three consecutive years of interest expenses exceeding earnings before interest and taxes.

Source: Adalet McGowan, Andrews and Millot (2017), "Insolvency regimes, zombie firms and capital reallocation", OECD Economics Department Working Papers.

32

Insolvency processes are improving

0.8

Index

Insolvency indicator 2016

Index 0.8 2010 0.6

0.4

0.4

0.2

0.2

0

0.0

GBR JPN DEU PRT ESP USA CHE FRA ISR IRL GRC CHL FIN SVN NZL ITA CZE POL MEX LVA AUT NOR SVK TUR SWE AUS CAN BEL NLD HUN EST

0.6

Source: Adalet McGowan, Andrews and Millot (2017), "Insolvency regimes, zombie firms and capital reallocation", OECD Economics Department Working Papers.

33

Contract enforcement is weak Enforcing contracts 100

Relative to the top performer, 2018

80 60 40

0

GRC SVN CAN ITA IRL ISR CZE SVK NLD CHL POL BEL JPN FIN CHE OECD MEX SWE DNK GBR TUR ISL ESP DEU NZL LVA PRT USA FRA LUX HUN EST AUT NOR AUS KOR

20

Source: World Bank (2018), Doing Business 2018 (database).

34

The business environment can improve further Product market regulation index Index 0 to 6, from least to most restrictive 3.0 2013 2.5

3.0 2008

2017 (preliminary) 2.5 2.0

1.5

1.5

1.0

1.0

0.5

0.5

0.0

0.0

NLD GBR AUT DNK NZL AUS DEU SVK ITA EST FIN PRT HUN BEL CZE JPN CAN ESP IRL LUX NOR FRA OECD ISL CHE CHL SWE USA LVA POL SVN GRC KOR MEX ISR TUR

2.0

Source: OECD (2017), Product Market Regulation database and OECD calculations.

35

Regulatory impact assessments are underused Ex-post evaluation of primary laws Composite index 4.0

2014

Composite index 4.0 3.5

3.0

3.0

2.5

2.5

2.0

2.0

1.5

1.5

1.0

1.0

0.5

0.5

0.0

0.0

GRC TUR IRL SVK USA FIN CZE JPN ESP FRA PRT CHL SVN NOR HUN ISL ITA NLD OECD LUX DNK POL ISR KOR NZL AUT EST SWE CHE CAN BEL DEU MEX GBR AUS

3.5

Source: OECD (2015), OECD Regulatory Policy Outlook 2015.

36

Barriers to FDI are low FDI regulatory restrictiveness index 0.30

0 (open) to 1 (closed) 2016

2006

0.30 0.25

0.20

0.20

0.15

0.15

0.10

0.10

0.05

0.05

0.00

0.00

LUX PRT SVN CZE NLD EST FIN ESP DEU HUN LVA GRC DNK BEL GBR IRL FRA SVK ITA JPN CHL SWE TUR OECD POL CHE NOR USA AUT ISR KOR AUS CAN ISL MEX NZL

0.25

Source: OECD (2017), "FDI statistics according to Benchmark Definition 4th Edition (BMD4): Foreign direct investment: main aggregates", OECD Globalisation Statistics (database).

37

Inwards FDI stocks are low but improving FDI inward stocks

% of GDP 60

Greece

OECD

% of GDP 60

EU

50

50

40

40

30

30

20

20

10

10

0

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Source: OECD (2017), "FDI statistics according to Benchmark Definition 4th Edition (BMD4): Foreign direct investment: main aggregates", OECD Globalisation Statistics (database).

0 38

Participation in global value chains can be strengthened Foreign value added in exports 60

%

%

60 50

40

40

30

30

20

20

10

10

0

0

Australia New Zealand Norway Chile Switzerland Turkey Israel Greece Spain Austria Sweden Denmark Estonia Portugal Netherlands Poland Mexico Slovenia Iceland Finland Belgium Korea Czech Rep. Hungary Slovakia Ireland Luxembourg

50

Source: OECD (2017), "TiVA Nowcast Estimates“, OECD International Trade and Balance of Payments Statistics database

39

Transport infrastructure hampers Greece’s participation in global trade Global Competitiveness Index 2017-18 Ports Railroads 0 to 7 (best) 7

6

6

5

5

4

4

3

3

2

2

1

1

0

0

HUN CZE AUT ITA GRC CHE AUS OECD FRA IRL PRT JPN CAN DEU ESP SWE GBR DNK USA BEL NLD

7

GRC HUN IRL AUS ITA PRT CZE OECD DNK SWE GBR BEL CAN AUT DEU ESP USA FRA NLD JPN CHE

0 to 7 (best)

Source: World Economic Forum, "The Global Competitiveness Report 2017-2018".

40

Main recommendations Boosting investment  Simplify regulatory impact assessments and build a network of civil servants with regulatory-quality expertise.

 Expand the scope of the “silence is consent” rule, ex-post compliance monitoring and one-stop shops; ensure that they have the resources to operate effectively  Fully implement the legislated insolvency reforms  Ensure a sufficient number of well-trained insolvency professionals start operating soon  Fully implement out-of-court workout procedures and e-auctions.  Continue to align banks’ governance standards with international best practices  Align tax incentives for disposing of non-performing loans with those of previous legislation and make them temporary  Finalise and implement the state asset management strategy and link it with the privatisation programme.  Complete the land registry

More in Chapter 1: Boosting investment

41

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This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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