“The completion of the program is an important milestone, with positive effects on the economic climate and prospects of the Greek economy. However, the sustainable return of the Greek state to international government bond markets will be the safest indication that the economy has overcome the crisis”, the Bank of Greece states in its interim report on the economy.
It is noted that the government bond yields are still high, due to turbulence in international markets, particularly in Italy, but also because of concerns over the possibility of the overturning of the reforms that have been agreed under the program. As a result, Greek businesses and households face high borrowing costs, which suggests that the Greek economy has not yet returned to regularity”.
The message that Bank of Greece governor, Giannis Stournaras, sends through the report is that the implementation of structural reforms that support potential growth is a prerequisite for boosting the confidence of international investors and enabling the return of the Greek state to international markets on sustainable terms. At the same time, the achievements of reforms should be safeguarded, so as to avoid overturning agreed policies, creating additional risks for the economy. Finally, judicial decisions that overturn parliamentary measures and jeopardize fiscal targets in the medium term, but also the sustainability of debt, must be adressed”.
Grow is a positive development
The Bank reports positive progress in terms of growth and the public economy, but argues that fiscal over-performance has a negative impact on the real economy as it is based on the increased tax burden and the reduction of investment costs.
As far as banks are concerned, there is admission that despite the improved outlook, banks’ non-performing loans remain extremely high.
According to the Bank of Greece’s forecast, economic activity is projected to increase by 2.1% in 2018, 2.3% in 2019 and 2.2% in 2020. This development is estimated to be based on business investments, exports, but also on the rise of private consumption./IBNA