IMF warns Greek risks are still lurk­ing

Any fresh un­cer­tainty on bailout pro­gram im­ple­men­ta­tion could trig­ger great pres­sure from mar­kets

Kathimerini English - - Front Page - BY SOTIRIS NIKAS

Just a few hours be­fore the ar­rival of the cred­i­tors’ tech­ni­cal ex­perts for their first re­view of the third bailout pro­gram, the In­ter­na­tional Mon­e­tary Fund sent a mes­sage that the risks on Greece re­main.

In its an­nual World Eco­nomic Out­look, the Washington-based Fund ar­gues that although the sign­ing of the agree­ment re­duced the dan­ger for Greece, there is a clear risk of pres­sure from the mar­kets if un­cer­tainty re­turns to the po­lit­i­cal land­scape re­gard­ing the im­ple­men­ta­tion of re­forms.

The IMF notes that in such a case there will be a chain re­ac­tion in other eu­ro­zone coun­tries, as the in­sta­bil­ity cre­ated by Greece in the fi­nan­cial sec­tor and the bond mar­kets “is likely to be trans­mit­ted to the en­tire eu­ro­zone,” not ex­clud­ing a fur­ther ex­pan­sion of the neg­a­tive con­se­quences.

The Fund’s

fore­casts on the coun­try’s eco­nomic con­trac­tion re­main the same, match­ing those of the first draft bud­get the gov­ern­ment sub­mit­ted in Par­lia­ment on Mon­day: a 2.3 per­cent con­trac­tion of gross do­mes­tic prod­uct for this year, in­clud­ing a siz­able shrink­age of 5.4 per­cent in the Oc­to­ber-De­cem­ber pe­riod, and a 1.3 per­cent con­trac­tion for 2016. It adds that while the re­cov­ery across the eu­ro­zone will be mod­er­ate, “the prospects for Greece are clearly more ad­verse fol­low­ing the pro- longed pe­riod of un­cer­tainty in the be­gin­ning of the year.” Still, it goes on to an­tic­i­pate a growth rate of 2.4 per­cent by 2020.

Asked about Greek growth, an IMF of­fi­cial said yesterday in Peru that “due to the cap­i­tal con­trols that led to the shrink­ing of the growth rate, we will see growth re­cover af­ter the third quar­ter of [next] year. The re­bound will not be so strong but it will im­prove within 2016.”

The pro­jec­tions of the IMF on un- em­ploy­ment are neg­a­tive, as it an­tic­i­pates an in­crease to 26.8 per­cent this year from 26.5 per­cent in 2014, climb­ing fur­ther to 27.1 per­cent in 2016. On the price in­dex, the Fund ex­pects 0.4 per­cent de­fla­tion this year and no move­ment in 2016. In the long run, it fore­casts that prices will grow 1.4 per­cent in 2020.

The lead­ing rep­re­sen­ta­tives of the coun­try’s cred­i­tors are sched­uled to ar­rive in early Novem­ber, for the first re­view of the third bailout pro­gram to be­gin.

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