Speedier reforms will lead the economy to investment grade, central banker says


The government has made a "dynamic start," in helping the economy recover but it has to significantly accelerate reforms to improve the country's position in the World Bank's governance indexes – used by credit rating firms – in order to be upgraded back to investment grade, Bank of Greece governor Yannis Stournaras said on Friday.

Addressing a conference organised by the Independent Authority of Public Contracts, the central banker said that the Greek economy will grow by 2.4 pct in 2020 (from a 2.8 pct growth rate envisaged in the state budget).

Commenting on the 2020 budget, he said that the government adopted a fiscally neutral growth policy mix, emphasizing a reduction of tax rates and a broadening of the tax base by promoting e-transactions.

A recent draft tax bill has a "growth dimension" in that it lowers the tax burden for citizens and enterprises, strengthens incentives for labour, encourages productive investments and reduces the black economy, all resulting in the increase of national products, he continued.

These actions are moving in the right direction and are in line with the recommendations made by the Bank of Greece in recent years, he said.

Referring to non-performing loans, Stournaras reiterated that the adoption of the "Hercules" plan was a step in the right direction but not enough in itself, as it deals with only 40 pct of NPLs.

For this reason, he added, authorities should examine a plan prepared by the Bank of Greece, which deals with the excess NPLs alongside the deferred tax issue.