IMF issues warning on savings, investments
IMF board anticipates Greek growth to reach 2.1% and inflation to ease to 2.8% this year
The International Monetary Fund revised slightly higher its forecast for Greek growth this year, from 2% in the initial estimates of the so-called Article IV mission last November, to 2.1% on Wednesday, in the final approval by its Executive Board. On the contrary, for 2023 it lowered its estimate, from 2.5% to 2.3%.
The government remains far more optimistic about growth this year than all the international agencies and banks that have published estimates, as it places it at 2.9%. For 2023, its estimate is for 2.4%. Also, the report predicts that inflation will ease from 4.2% in 2023 to 2.8% this year (against a government forecast of 2.6%) and reach 2% at the end of 2025.
The important takeaway from this IMF report, however, is that it sticks to its concerns about medium-term growth and inflation. On growth, a source of concern is the low level of savings and comparatively limited investment.
The executive directors of the Fund – while noting that the general economic situation of Greece has improved – add that significant challenges remain. They report that real GDP has returned to higher than pre-pandemic levels, thanks to tourism, Recovery Fund investment and foreign direct investment. These high growth rates combined with high inflation have also driven the debt below its pre-pandemic levels, and its financing risks, in the medium term, are limited thanks to its favorable structure.
“However,” the report continues, “structural imbalances, resulting from low savings and even lower levels of investment, as well as increasing risks from climate change, weigh on medium-term growth prospects.” IMF executives also point out weaknesses in the country’s trade balance.
On inflation, they warn that a potential escalation of the war in Ukraine and conflicts in Gaza and Israel could lead to further pressures on food and energy prices.
On the fiscal front, the IMF calls for growth-friendly stabilization to improve public debt sustainability while supporting inclusive and green growth.
