Economic Growth Dynamics and Productivity Trends in the Greek Economy: A 60-Year Perspective

Working Paper Series

This paper examines the evolution of economic growth in Greece over the past six decades, identifying its key drivers and assessing the long-term implications of the Greek Depression. Using a state-of-the-art growth accounting framework, we find that Total Factor Productivity (TFP) was the dominant driver of growth during the 1960-1973 expansion but weakened significantly post-1974. The 1994-2007 period experienced
a more balanced contribution from TFP and capital accumulation, while the 2008-2016 Greek Depression led to an unprecedented collapse in economic activity, driven by deep declines in productivity and investment and a surge in unemployment. 

The crisis was initially driven by productivity and capacity utilization losses, with labor market disruptions and capital de-accumulation deepening the downturn. Beginning in 2017, the economy has gradually recovered and since 2021 the pace of recovery has accelerated. The recovery, supported by growth-enhancing reforms and EU-level funding, was characterized by significant employment gains alongside a moderate rebound in productivity and investment growth, although challenges remain. Projections suggest that returning to pre-crisis real GDP per capita by 2030 is feasible but requires sustained investment growth to boost labor productivity.