IOBE report raises hopes on growth and debt

The recession may not be as bad as originally thought after all this year, but unemployment will be even worse, according to adjusted forecasts presented on Monday in Athens by the Foundation for Economic and Industrial Research (IOBE), which highlighted the view that it is only through growth that the Greek debt can become sustainable.

In its quarterly report IOBE said it now expects the country?s gross domestic product to contract by 6.6 percent in 2012, against a forecast for a 6.9 percent contraction in the previous report, while the jobless rate has been revised from 23.6 percent to 24.2 percent for this year.

?Greece will be able to service its debt around the end of the decade and without any further assistance by its creditors, besides some practical help that is common in such circumstances,? IOBE Vice President Raphael Moissis said. He stressed that what is important for the debt to be considered ?sustainable? is not its GDP ratio but whether it has a declining course or not. According to the scenarios drafted by the foundation — which current Finance Minister Yannis Stournaras used to head — the course of the debt will start declining from 2013 onward.

Nikos Zonzilos, a scientific adviser at IOBE, added that the ?success in containing the public debt will be determined by the growth policies to be followed.? IOBE estimates that the increase in the growth course of private investment (not including housing) in the 2013-20 period will be 13 percent, almost identical to that of the 2000-08 period, leading to an increase of GDP by 0.5 percent per annum. ?Reducing the debt is a marathon,? Zonzilos stated.

IOBE also believes that the course of the 2012 budget remains within targets and that there are some encouraging results. However it qualifies the risk of revenues lagging by 1 billion euros as imminent.

Asked about civil sector layoffs, Moissis said, ?We generally are against layoffs,? but he added that it is only the private sector that has been hurt in that way.

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