The Greek economy could grow by 2.5 pct this year on conditions, the Bank of Greece said in its Annual Report, presented by governor Yiannis Stournaras on Friday.
Based on current data, the country’s primary surplus in 2016 is expected to be around 2.0 pct of GDP, while a target for a primary surplus of 1.75 pct of GDP this year is considered to be feasible. The central banker, however, warned there were still risks related with economic growth prospects. The first category of risks is related with instability in international environment, while domestic uncertainties and risks are related mostly with delays in implementing an economic program, as reflected in difficulties to complete a second review of the program.
The Bank of Greece governor noted that if these delays were to continue, they could raise serious hurdles to the expected growth, with negative consequences in economic climate and opening a new cycle of uncertainty over completion of the program. This uncertainty could increase if Greece failed to be included in an European Central Bank’s QE program, he added. All these could undermine confidence and avert efforts to attract foreign investments -a necessary precondition for economic growth. The central bank said that risks were also related with delays in implementing reforms aimed to boost competitiveness, in sectors such as the electricity energy market.
The central banker said that the most serious hurdle to be gradually lifted was excessive taxation of enterprises and individuals. An overshooting of a fiscal target on primary surplus in 2016 was mostly attributed to higher tax revenue and less to a cut in public spending. Stournaras said that the current fiscal policy mix operated adversely to economic growth, it contributed in raising private sector arrears to the state and encouraged tax evasion and informal labor.
Referring to non-performing loans, the central banker said their reduction was the most significant challenge for the banking system, although he said it was encouraging the fact that NPLs fell to 106.3 billion euros at the end of 2016, from 107.6 billion at the end of the third quarter of 2016. He said that the goal was to reduce NPLs by 40 billion euros until the end of 2019, but noted that delay in legislating the necessary measures, combined with uncertainty related with a slow progress of negotiations with institutions to conclude a second review of the Greek program, raised risks over achieving this goal. Stournaras said that new non-performing loans grew in the first month of 2017.
The Greek economy continues to have competition distortions in some markets and there is significant room to free its dynamism, Bank of Greece governor Yannis Stournaras said on Wednesday.
Addressing an event organized by the Federation of Hellenic Label Product Industries, the central banker said that structural competitiveness of the Greek economy improved in 2013-2014 (based on a series of indexes compiled by the OECD, World Bank and the World Economic Forum), but shows signs of a standstill or even slowdown lately. According to the Ease of Doing Business index of the World Bank, the country’s position in the global list fell to 61st place, from 58th, among 190 countries. The World Economic Forum in its World Competitiveness Index said that Greece fell to the 86th place in 2016 from 81st in 2015, while according to the IMD’s competitiveness performance table, Greece fell six positions to 56th among 61 countries. Stournaras underlined that the current situation was an opportunity to implement the necessary reforms as the first signs of economic recovery were visible, a change compared with the previous period when an unstable economic environment and shrinking domestic demand did not allow significant reforms made to show their real benefits to consumers, enterprises and markets.