IMF: Economy of Greece to Bounce Back Significantly in 2022

The economy of Greece is projected to grow by 5.4 per cent in 2022, the International Monetary Fund (IMF) said in its staff report on Greece that was released on Friday.

This will come on top of the 3.3-per cent growth that the Fund forecasts for the Greek economy in 2021.

The IMF noted in its report that government measures that have already been announced to support businesses and individuals would help contain the impact of the COVID-19 pandemic on the non-financial companies sector.

However, the Fund also said the measures of the government of Greece to support the economy during the pandemic will lead to a primary deficit of 7.2 per cent of GDP.

”While full vaccination is progressing at a rate above the European average, a more prolonged pandemic would add unprecedented uncertainty and downside risks to all sectors of the economy,” the report also noted, is a depiction of the broader uncertainty that still prevails across the globe.

Furthermore, the IMF mentioned that the inflow of Recovery Funds from the European Union will help Greece enter a virtuous cycle, with economic growth, higher credit expansion, lower taxation, upgrading the country’s credit rating into an investment grade, thus reducing the stock of non-performing loans and debt sustainability.

”(The European) funds have the potential to support Greece’s transition to a job-rich, fairer, and greener growth model provided the public investment framework is upgraded,” the IMF also mentioned in its report.

The economy of Greece did better than expected in 2020

The traditionally cautious IMF was also very generous with its comments on Greece for the past year. In its introduction to the report, the Fund said that Greece did better than expected during the first year of the pandemic.

”Greece entered the pandemic with an unfinished recovery, but the country has demonstrated resilience in facing COVID-19. The economy contracted by 8.2 per cent in 2020, better than expected given Greece’s high dependence on tourism and pre-existing vulnerabilities,” the Fund stated.

”The government provided among the largest on-budget fiscal stimuli in the eurozone and supervisory and ECB accommodation shielded the banking sector and kept financing conditions highly accommodative,” it added.

”Despite the pandemic, reforms progressed in a number of areas, albeit at a slower pace than in recent years,” the IMF noted in its report.

The IMF also mentioned that the public debt of Greece will fall in the medium term, after reaching a new height in 2021, and noted that financial needs for servicing the debt remained manageable, leaving the country’s public debt sustainable in the medium term.

However, great uncertainties prevailing globally did not allow the Fund to make any predictions over the long-term sustainability of the debt, showing how volatile the situation of the global economy remains.