Despite its swift and effective response to the coronavirus pandemic, Greece must bolster its economy with added measures, the Organization for Economic Co-operation and Development (OECD) said this week, urging at the same time the introduction of employment enhancement measures, increasing productivity growth, addressing banking system needs, and ensuring fairness and efficiency of the tax system.
Greece has so far managed to contain the spread of Covid-19 infections, but the economy, mainly due to the fallout in tourism revenue, has been hit hard, adding to already long-standing challenges, the OECD report said.
Indicatively, Greece’s economy had been growing by almost 2 percent for over three years before the Covid-19 outbreak. Last month, the OECD revised its previous forecast for Greece, estimating that the country’s economy will contract at a smaller rate this year compared to the eurozone average.
More specifically, OECD recommendations in order for Greece to address Covid-19 repercussions on its economy include promoting inclusive growth and extending fiscal support measures as needed based on epidemiological and economic developments while ensuring they do not hinder the reallocation of resources towards firms and sectors with better growth prospects.
Tackling tax evasion and enlarging the tax base so as to lower statutory tax rate are also high priorities, according to the report, as is boosting public investment to support growth and environmental sustainability, including in public transport, innovation and waste management.
Other crucial actions include accelerating the digitalization of public administration; implementing the Hercules scheme to dispose of non-performing loans; addressing deferred tax credits and bad loans; unifying insolvency proceedings; adopting a national air pollution control program; and reviewing tax variation across fuels.
The OECD recommendations cover a wide spectrum of Greek economic activity and also include consolidating agencies responsible for research and innovation policies; simplifying access to R&D grants and tax incentives; lowering product market regulation in professional services, especially for notaries, lawyers, civil engineers and architects, and retail distribution; and reducing social insurance contribution rates, especially at low incomes, while aligning taxation across employment types.
“Ambitious and comprehensive reforms are key to overcoming the Covid-19 shock and durably raising well-being,” said the report.
OECD analysts underline that a potential second Covid-19 wave may further curtail tourism and service demand, which would require extending government support. Current funding tools are set to support incomes and firms into 2021.
At the same time, in order to speed up recovery and make the economy and society more resilient, the think-tank suggests businesses and their employees upgrade activities and skills and shift to sectors that promise better opportunities.
It is crucial to increase long-term productivity growth to accelerate the recovery and help raise living standards, the report said.
“The Covid-19 crisis has interrupted Greece’s process of recovery and hard-won achievements in rebuilding confidence,” said OECD Chief Economist Laurence Boone during a presentation of the report on Wednesday.
“Continuing to improve the public administration’s responsiveness to the needs of citizens and firms will be essential for reinvigorating the recovery.”