Publications
Partners
Johannesburg - The Greek recession will be deeper
than earlier anticipated and a recovery of the economy is now expected
only from 2013 onwards, said the International Monetary Fund (IMF).
Staff teams from the European Commission (EC), European Central Bank (ECB) and IMF concluded their fifth review mission to Greece on Tuesday.
They discussed recent economic developments in that country and reached a staff level agreement with the authorities on the economic and financial policies needed to bring the government's economic programme back on track.
The IMF said there was no evidence yet of improvement in investor sentiment and the related increase in investments, in part because reform momentum had not gained the critical mass necessary to begin transforming the investment climate.
Exports were however said to be rebounding, albeit from a low base. A shift towards a more dynamic export sector, supported by a moderation of unit labour costs, is expected to lead to more balanced and sustainable growth over the medium term.
Inflation was reported to have come down over the last year and is expected to remain below the euro area average in the period ahead.
The government has achieved a major reduction in the deficit since the start of the programme despite a deep recession, the IMF said.
"However, the achievement of the fiscal target for 2011 is no longer within reach, partly because of a further drop in GDP (gross domestic product), but also because of slippages in the implementation of some of the agreed measures," the global lender said.
As for 2012, the mission believes the additional measures announced by the government, in combination with a determined implementation of the adjusted medium-term fiscal strategy, should be sufficient to bring the fiscal programme back on track and ensure that the deficit target of €14.9bn would be met.
The IMF advised that looking ahead to 2013/14, additional measures are likely to be needed to meet programme targets.
"Such measures should be adopted in the context of an update of the medium-term fiscal strategy by mid-2012," the IMF said.
In the area of privatisation, the IMF reported that progress had been achieved with the creation of a professionally managed privatisation fund. However, delays in the preparation of the assets for privatisation - and to some extent deteriorating market conditions - meant that revenues in 2011 would be significantly lower than expected.
"The government remains, however, committed to the revenue target of €35bn by the end of 2014. Ensuring that the privatisation fund remains independent from political pressures remains key for success in this area," it said.
Banks had improved their capital base through market-based means, the IMF staff reported, adding that the recent amendment of the banking law ensured that non-viable banks could be wound down while protecting depositors' interest and preserving the stability of the financial system.
Overall, the staff said Greek authorities continued to make important progress, notably with regard to fiscal consolidation.
They also urged authorities to "put more emphasis" on structural reforms in the public sector and the broader economy.
"Once the eurogroup and the IMF's executive board have approved the conclusions of the fifth review, the next tranche of €8bn (€5.8bn by the euro area member states, and €2.2bn by the IMF) will become available, most likely, in early November," the IMF said.
Staff teams from the European Commission (EC), European Central Bank (ECB) and IMF concluded their fifth review mission to Greece on Tuesday.
They discussed recent economic developments in that country and reached a staff level agreement with the authorities on the economic and financial policies needed to bring the government's economic programme back on track.
The IMF said there was no evidence yet of improvement in investor sentiment and the related increase in investments, in part because reform momentum had not gained the critical mass necessary to begin transforming the investment climate.
Exports were however said to be rebounding, albeit from a low base. A shift towards a more dynamic export sector, supported by a moderation of unit labour costs, is expected to lead to more balanced and sustainable growth over the medium term.
Inflation was reported to have come down over the last year and is expected to remain below the euro area average in the period ahead.
The government has achieved a major reduction in the deficit since the start of the programme despite a deep recession, the IMF said.
"However, the achievement of the fiscal target for 2011 is no longer within reach, partly because of a further drop in GDP (gross domestic product), but also because of slippages in the implementation of some of the agreed measures," the global lender said.
As for 2012, the mission believes the additional measures announced by the government, in combination with a determined implementation of the adjusted medium-term fiscal strategy, should be sufficient to bring the fiscal programme back on track and ensure that the deficit target of €14.9bn would be met.
The IMF advised that looking ahead to 2013/14, additional measures are likely to be needed to meet programme targets.
"Such measures should be adopted in the context of an update of the medium-term fiscal strategy by mid-2012," the IMF said.
In the area of privatisation, the IMF reported that progress had been achieved with the creation of a professionally managed privatisation fund. However, delays in the preparation of the assets for privatisation - and to some extent deteriorating market conditions - meant that revenues in 2011 would be significantly lower than expected.
"The government remains, however, committed to the revenue target of €35bn by the end of 2014. Ensuring that the privatisation fund remains independent from political pressures remains key for success in this area," it said.
Banks had improved their capital base through market-based means, the IMF staff reported, adding that the recent amendment of the banking law ensured that non-viable banks could be wound down while protecting depositors' interest and preserving the stability of the financial system.
Overall, the staff said Greek authorities continued to make important progress, notably with regard to fiscal consolidation.
They also urged authorities to "put more emphasis" on structural reforms in the public sector and the broader economy.
"Once the eurogroup and the IMF's executive board have approved the conclusions of the fifth review, the next tranche of €8bn (€5.8bn by the euro area member states, and €2.2bn by the IMF) will become available, most likely, in early November," the IMF said.
