Greece is losing competitiveness

In the report of the governor of the Bank of Greece Giannis Stournaras for 2023, the following are mentioned in relation to the structural competitiveness of our country (p. 137): according to the global competitiveness ranking of the IMD Institute (World Competitiveness Ranking, 20.6.2023), Greece in 2022 lost two places in the overall ranking, ranking 49th among 64 economies, a position it was in in 2020.

Public sector efficiency improved marginally (53rd from 55th), offsetting a marginal decline in private sector efficiency (48th from 46th).

However, in terms of macroeconomic performance it was ranked seven places lower than in 2021 (58th from 51st), mainly due to high inflation, low birth rates and a high current account deficit.

According to the IMD survey, the least attractive features of the Greek economy are the complex tax framework, despite successive reductions in tax rates, the ineffective framework for administration of justice and protection of private property, the perceived low quality of corporate governance and the lack of strong culture for research and development.

According to the Tax Foundation’s international tax competitiveness index (18.10.2023), which examines over 40 tax policy variables, Greece was again ranked 25th among 38 countries in 2022, as it was in 2021.

However, its performance in absolute terms saw a slight decline as, according to the report, “its scores on consumption taxes and cross-border tax rules deteriorated, while on property taxes they improved.” The report of the Bank of Greece also points out that it continues to occupy a comparatively better position in terms of the taxation sub-indices of natural and legal persons (8th and 19th respectively), while it lags behind in the taxation of assets (28th) and consumption (33rd). The main weaknesses are, on the one hand, that companies are only allowed to offset their operating losses with future profits up to a limited amount, nor are they allowed to include losses in the taxable income of previous years, and on the other hand, that the high VAT is included in one of the narrowest taxable bases, which covers only 36% of final consumption.

Finally, the report notes that Greece was downgraded for the first time after ten years of progress in the Transparency International Corruption Perceptions Index (31.1.2024). Falling three points, in 2023 it ranked 59th among 180 countries under review and 24th among the 27 EU countries. In contrast, Greece in 2023 returned to the “full democracy” category in

“Economist” Democracy Index (15.2.2024), ranked 20th, five places higher than in 2022.
Obviously, on the basic issue of structural competitiveness, so important for the Greek economy and society, the reported results seem to have worsened under the Mitsotakis government.

In terms of structural competitiveness, Greece seems to continue to lag significantly behind most advanced countries as well as the EU of 28. The domestic business and investment environment remains more unfavorable compared to competing countries, mainly in terms of relative taxation, relative non wage costs, energy costs, financing costs, but also in terms of the institutional framework that concerns the general functioning of the public sector and the mentality of Greek businessmen.