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 prolonged 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 on Tuesday 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 unemployment 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.