IMF Lowers Greece’s Growth Forecast to 2%, Debt and Reforms Remain Key

The International Monetary Fund announced that the Greek system volition turn by 2% successful 2025. Credit: Flickr / Simon D. McCourtie / CC BY-NC-ND 2.0

The International Monetary Fund (IMF) has lowered its forecast for Greece’s economical maturation this twelvemonth to 2%, down from 2.3% earlier successful 2024. In its autumn economical outlook, the Fund maintains a medium-term maturation projection of 2% successful 2026, reflecting expectations of mean but dependable expansion.

Inflation is projected to borderline higher to 3.1% successful 2024, earlier easing to 2.5% by 2026, portion Greece’s existent relationship shortage is expected to stay successful antagonistic territory—-5.8% of GDP successful 2025 and -5.3% successful 2026.

Unemployment is forecast to proceed its gradual decline, reaching 8.4% successful 2026, signaling an improving labour marketplace contempt tighter maturation prospects.

Debt remains a defining constraint

While the IMF acknowledges that Greece has firmly exited its bailout programs, it stresses that the state remains 1 of Europe’s astir indebted economies—a cardinal origin that inactive shapes recognition ratings and marketplace confidence.

Greece is grouped among the IMF’s “European debtors,” alongside Cyprus, Ireland, Portugal, and Spain—countries that person rebounded from fiscal crises yet inactive transportation precocious indebtedness loads. The Fund notes that maintaining fiscal subject and betterment continuity remains indispensable to safeguard credibility and forestall vulnerabilities from resurfacing.

April Review: Strong recovery, enduring reforms needed

The IMF’s April 2024 Article IV reappraisal had painted a much optimistic near-term picture, highlighting robust growth, beardown investment, and a resilient labour market. The Fund described Greece’s short-term outlook arsenic “favorable,” crediting the country’s post-crisis translation and effectual argumentation management.

Back successful April, the IMF projected 2.1% GDP maturation for 2025, driven chiefly by concern projects funded done the EU’s Recovery and Resilience Facility (NextGenerationEU). Rising employment and household incomes were besides expected to enactment backstage depletion and prolong home demand.

However, the Fund warned that arsenic EU betterment backing gradually tapers off, Greece volition request to trust much connected structural reforms and backstage concern to support momentum. It cautioned that “continued fiscal vigilance” and ambitious argumentation reforms are captious for ensuring semipermanent stableness and sustainable growth.

Inflation pressures and outer risks

The April study besides pointed to persistent halfway inflation, peculiarly successful services, fueled by rising wages and beardown home demand. The IMF identified outer risks specified arsenic slower eurozone growth, geopolitical tensions, and planetary argumentation uncertainty, each of which could dampen Greece’s medium-term prospects.

The Fund urged the authorities to support argumentation flexibility and to property up with structural reforms that heighten competitiveness, productivity, and labour marketplace efficiency. It warned that faster wage growth, if not matched by productivity gains, could prolong inflationary pressures.

Banking strategy strengthened, but monitoring needed

The IMF’s outpouring reappraisal praised the resilience of Greece’s banking system, noting a crisp diminution successful non-performing loans (NPLs) to astir 3%, alongside beardown profitability and superior adequacy. Liquidity risks person besides receded, with buffers good supra supervisory thresholds and EU averages.

Nonetheless, the Fund highlighted remaining pockets of vulnerability stemming from accelerated recognition enlargement and vulnerability to existent estate. It welcomed the activation of the countercyclical superior buffer (CCyB) and borrower-based lodging measures, urging regulators to proceed monitoring imaginable fiscal risks arsenic recognition conditions evolve.

Fiscal and structural reforms astatine the halfway of stability

The IMF commended Greece’s fiscal consolidation, supported by stronger revenues and reforms to combat taxation evasion. It recommended maintaining superior surpluses supra 2% of GDP implicit the mean word to reenforce indebtedness sustainability.

The Fund besides called for prioritizing nationalist concern successful greenish and integer transitions, improving the ratio of societal spending, and containing nationalist assemblage wage and pension growth. It urged continued efforts to boost labour unit participation, particularly among women, and to trim regulatory barriers that hinder entrepreneurship and competition.

Judicial reforms were besides deemed captious for enhancing capitalist assurance and improving the concern environment. The IMF further encouraged Greece to enactment connected people with its greenish and integer transformation, viewing them arsenic cardinal pillars for aboriginal competitiveness.

A cautious but constructive outlook

Taken together, the IMF’s autumn update and April reappraisal outline a accordant message: Greece’s betterment is resilient but inactive vulnerable.

Yet, the IMF emphasizes that sustained reform, disciplined fiscal management, and structural modernization stay indispensable for Greece to unafraid durable, inclusive, and semipermanent growth.