Before referring to specific parameters of the Greek economy, I would like to focus a bit on the risks arising from the Middle East crisis. First, given that many governments will need to adopt fiscal support for their citizens, what kind of measures would you recommend for an economy like the Greek one? I’m asking this because the government in Greece appears to favor targeted measures and not tax reduction of consumption taxes or VAT. And second, both in short and in medium term, what are the major risks for the Greek economy due to the Middle East crisis?

Any support measures to mitigate the impact of the energy price shock should be well-targeted and temporary, while preserving price signals. Support should be channeled primarily through the social safety net to protect the vulnerable households, leveraging Greece’s advances in digitisation to expand coverage and ensure efficiency delivery. Potential assistance to firms should be temporary, coordinated at the European level and limited to viable energy-intensive firms facing financial stress and linked to actions to increase energy efficiency.

Over the medium term, based on the strong track record of the strong growth and investment in Greece, this establish a strong foundation to address remaining legacy issues and structural impediments, including the still low overall investment, sluggish productive growth, and adverse demographic trends. That’s why it is important to deploy the right policy mix centered on maintaining growth-friendly but prudential fiscal policy bolstering financial system resilience and accelerating structural reforms. That would help to preserve macrofinance stability and foster balance and sustainable growth in Greece over the medium term.

Let’s focus on the Article IV consultation. First of all, which are the main conclusions regarding the performance of the Greek economy? And which is your forecast, focusing on a baseline scenario, given the adverse circumstances worldwide.

In Greece, strong domestic demand and ongoing reforms in the context of next-generation EU are sustaining robust growth. However, our outlook is now clouded by the conflict in the Middle East. In that context, in our latest projection, growth is projected to moderate to 1.8% of the GDP in 2026. In our scenario, we assume that oil and gas prices that are broadly consistent with the futures price by mid-March this year. Under that assumption, higher public investment and the recent fiscal package will support activity. But elevated energy prices and weaker external demand related to the conflict in the Middle East are expected to weigh on private consumption and tourism.

You referred to the Recovery and Resilience Facility which will be completed within this year. You have also mentioned that Greece has the potential to continue increasing the investment per GDP ratio. Nevertheless, the need to support investments is still there. What are your policy recommendations towards this direction?

In terms of the impact at the end of the NGEU by this year, we do not expect an investment cliff. While the grant component of NGEU will expire at the end of this year, the loan component, which is around half of the total RRF funding, will continue for the next three years. Greece will also keep absorbing other EU structural funds, where the execution has been somewhat slow due to the back-loading effect in order to prioritize NGEU funding. Private investment is also expected to strengthen as the growth outlook improves, supported in part by continued flows upon direct investment. Overall, despite the expiration of the NGEU grants, we project that total investment as a share of GDP will continue rising over the medium term. But as you mentioned, there will still remain an investment gap, relative to euro area average. That’s why more effort is needed to accelerate structural reforms and increasing investment.

As you refer to structural reforms, which ones do you consider crucial for boosting growth?

Structural reforms remain very essential to sustainably support growth at a higher level of the medium term and reduce persistent chronic deficit. Further reducing regulatory and administrative burdens, together with more effort to foster digital transformation in the private sector, would boost firms’ growth and productivity by promoting business dynamism and competition. And amid declining working age population, it is also important to raise labor force participation to improve growth prospect.