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Greece is 'now among the top performers in the euro zone,' IMF says

Holly Ellyatt
Tourists sit on rocks with a view of the Parthenon temple on Acropolis Hill in Athens, Greece

Greece, the euro zone economy that suffered the most during the sovereign debt crisis and a country with the highest debt and unemployment, is now "among the top performers in the euro zone," according to the International Monetary Fund (IMF).

In a new report on the Greek economy, the IMF – which was one of Greece's principal lenders in bailouts during its economic crisis – said Greece had made positive economic progress.

"There are a lot of positive developments to point to. We expect growth to accelerate to nearly 2.5 percent this year from around 2 percent in 2018. This puts Greece in the upper tier of the euro zone growth table," the IMF's mission chief for Greece Peter Dohlman said in a report Tuesday.

"The government is meeting its ambitious fiscal targets agreed with European member states, though not without some cost to growth. Market access has been re-established with two successful government bond issuances this year."

"We also see normalization in other areas. For example, customers are now free to move their cash to any bank in Greece, and the banks themselves have almost fully repaid emergency liquidity assistance provided by the European Central Bank. Over the medium-term, we expect growth to gradually moderate as the economy reaches full employment," he added.

Greece no longer has a borrowing arrangement with the IMF, which along with the European Commission and European Central Bank, was a lender of last resort to the stricken country during its government debt crisis during the global financial meltdown of 2009.

Greece currently owes the IMF 9.4 billion euros ($10.6 billion) following its role in the country's three bailouts since 2010. Collectively, the bailouts were worth 289 billion euros and were funded and overseen by the EU and, to a lesser extent, the IMF.

Bailouts came with stringent conditions ranging from widespread austerity measures to privatization programs and Greece was given tough economic targets. Greece completed its last, three-year bailout program last August. Keen to make sure reforms in Greece remain on track, the IMF conducts two formal consultations with Greece every year akin to what it called an "economic health check."

The Eurogroup of euro zone finance ministers also continues to watch Greece's economic, fiscal and financial situation closely in what it calls "enhanced surveillance reports."

A meeting of the Eurogroup on Monday praised Greece for making progress on reforms but said it needed to do more, delaying a decision on debt relief measures worth almost a billion euros until its next meeting in April.


Despite Greece's progress on reforms, unemployment remains at the highest level in the EU, at 18.5 percent in November 2018 (down from 21.1 percent a year before), according to the latest data from Eurostat. Youth unemployment remains high in Greece, at 39.1 percent in November.

The IMF said that while unemployment was declining, the jobless rate was "still unacceptably high, especially for young people" and that growth was being sacrificed to fiscal targets.

"Despite its hard-earned economic stability, Greece remains a country confronted by elevated vulnerabilities and weak payment discipline. This is reflected, for example, in the very high nonperforming loan ratios in the banks and elevated levels of private- and public-sector debt and arrears," the IMF warned.

Greece is to hold a general election in 2019 and this is expected to put further pressure on government policies, the IMF noted.

"There are risks from election year pressures on policies—such as to increase wages—as well as possible fatigue after years of cost cutting and reform efforts. The necessary adjustment away from the unsustainable policies that led to the crisis has imposed a heavy cost, despite efforts to protect the most vulnerable through targeted support—such as the guaranteed minimum
income scheme."

The IMF said that risks were also posed by tightening of global financial conditions, via higher interest rates, and slowing growth elsewhere in the EU. In 2019, the euro zone's largest economies Germany and France are only expected to grow 1.1 percent and 1.3 percent respectively, according to the latest winter forecasts from the European Commission. Greece, on the other hand, is seen growing 2.2 percent.

The IMF recommended that Greece implements policies to boost labor market flexibility, productivity and competitiveness. It also said the country should improve its "fiscal policy mix" and work to support its banks which it said remained "crippled by past-due loans."