IMF sees better days in late 2010

IMF sees better days in late 2010Fund forecasts Greek economy will shrink by up to 2 pct in 2009, calls for fiscal and structural reforms

By Stelios Bouras - Kathimerini English Edition

The International Monetary Fund (IMF) expects the Greek economy to shrink by up to 2 percent this year and warned that fiscal and structural reforms are needed for the economy to get back on the recovery track.

IMF officials, who were in Athens for two weeks putting together the Fund’s report on Greece, said falling consumer and business confidence as well as lower industrial production and retail sales have contributed to the slowing economy.

“The mission projects growth between minus 1 and minus 2 percent in 2009 with a recovery beginning late in 2010,” it said.

After showing an average annual growth rate of 4 percent for the last seven years, Greece’s economic expansion in the first quarter slowed to an annual pace of 0.30 percent, its slowest since 1993. The IMF’s annual forecast is in line with the European Commission’s projection, which predicts Greece’s economy will shrink by an annual pace of 0.90 percent in 2009 before recovering moderately next year to show a growth rate of 0.1 percent. The IMF said a recovery in the medium term is likely to be “tepid” in the absence of reforms.

The Washington-based fund recommended sweeping changes to tax regulations, continuing wage moderation and social security reforms to help lower the budget deficit, which it sees widening to ”at least 6 percent” of gross domestic product.

“Measures such as subsidizing car sales... do little for growth but further increase debt,” it said. Earlier this year, the government introduced a 50 percent cut in the registration tax on new cars and motorcycles in a bid to support the sector.

Commenting on the IMF report, Economy and Finance Minister Yiannis Papathanassiou said the ministry is looking over the comments, though it doesn’t agree with all points made and described the next two years as being vital for Greece, without giving further details. sbouras@ekathimerini.com