Greece, whose debt crisis almost led to its economic collapse a decade ago and threatened the future of the eurozone, is recovering as investment sentiment improves on the back of rising exports, the International Monetary Fund said.
“The economic recovery in Greece is accelerating and broadening,” IMF’s executive board said after the first post-financing programme consultation with Greece. “A gradual recovery in private deposits has facilitated further relaxation of capital flow management measures, though bank lending remains negative.”
The country's economy is forecast to grow 2.4 per cent this year, according to the Washington-based lender. Since 2010, the EU and the IMF have granted more than €300 billion (Dh1.24 trillion) in bailout loans to Greece and imposed harsh fiscal terms on the country. The bailout programme forced Greece to meet strict budgetary targets and adhere to frequent inspections and consultations. Though the country has rebounded, the IMF projects that over the medium term, economic expansion is expected to slow down to a little above 1 per cent.
Greece amassed international debt over a 30-year period and in 2009 its deficit had reached four times the size allowed under the EU rules. The deficit further expanded to five times the permitted amount, which prompted the IMF and EU to bailout the country under the condition of implementing a severe austerity programme.
Greece’s medium-term debt repayment capacity is adequate, but it is subject to rising risks amid still significant vulnerabilities. Athens' debt-to-gross domestic product ratio is projected to remain on a downward trajectory in the medium term, due to to continued high primary surpluses agreed with its European partners, growth in nominal GDP and debt relief, the IMF said. However, the country still faces both domestic and external risks.
The IMF on Wednesday lauded Greece’s progress in implementing reforms, which have helped restore stability and growth, reduce unemployment, improve debt sustainability and re‑access markets.
Building on Greece’s growth momentum, the lender is encouraging the country's authorities to bolster economic resilience and inclusive growth by enhancing labour market flexibility, rebalancing the fiscal policy mix and strengthening balance sheets of banks.
The IMF has asked to accelerate public financial management reforms and tax compliance efforts and address the structural causes of arrears. It also recommended “deeper contingency planning for the possible realisation of rising fiscal risks”.