In its latest report, “Improving Resource Allocation to Boost Growth in Greece,” the IMF reveals that total factor productivity remains stagnant and is still about 10% below pre-crisis levels.
One of the report’s central findings is that resources in the Greek economy—particularly in non-tradable sectors like construction, professional services, and hospitality—are not being efficiently allocated. In these areas, productive businesses struggle to access the capital and labor they need, while less efficient firms continue to absorb valuable resources. This misallocation is especially severe among small enterprises, which make up a large portion of the Greek economy.
The study, which analyzed data from 58,000 companies, also highlights the difficulties faced by younger, more innovative firms. While these businesses typically exhibit higher productivity—between 10% and 20% greater than older firms—they often cannot grow due to limited access to financing and restrictive regulations. As a result, their economic contribution remains limited, despite their potential.
Greece’s regulatory environment is another major obstacle. According to the IMF, the country is among the most legislatively active in the OECD, frequently introducing new laws that add layers of complexity. This overregulation weakens competitiveness and discourages investment. The report notes that Greek businesses themselves cite regulatory complexity as one of the main barriers to growth.
To address these issues, the IMF recommends a faster pace of reform focused on simplifying regulations and evaluating the effectiveness of existing laws. It also calls for improvements to the judicial system and efforts to reduce the volume of non-performing loans that continue to constrain credit availability. These steps, the IMF argues, would allow resources to flow more freely to productive firms.
In addition to regulatory and financial reforms, the report advocates for a shift in how investment incentives are structured. Rather than rewarding businesses based on size, Greece should focus on encouraging innovation and research and development. This would better support the country’s younger, high-potential enterprises.
Finally, the IMF emphasizes the importance of increasing labor force participation, particularly among women, young people, and older workers. By implementing targeted social policies that support these groups, Greece could expand its labor supply and boost long-term growth.
While acknowledging the progress Greece has made since its crisis years, the IMF concludes that deeper and more targeted reforms are essential to unlocking the country’s full economic potential and ensuring that productivity gains are widely shared across the economy.
