ECONOMY

Call for gov’t reforms gets louder

The Greek economy is expected to slide into recession this year amid the global downturn and faces the risk of extended slow growth if it fails to adopt structural reforms and correct its fiscal imbalances, the International Monetary Fund said yesterday. The IMF projected that the Greek economy will contract by 1.7 percent this year and 0.4 percent in 2010, with unemployment rising to 9.5 percent in 2009. «Greece cannot postpone fiscal consolidation. Given weak political support, adjustment will need to be realistic, yet show strong commitment to improving the fiscal balance step by step,» the Fund said. «Structural reforms are imperative to improve competitiveness for renewed growth.» In light of planned government measures to boost Greek revenues, the IMF said it had reduced its deficit projections, by 0.3 percent this year and 0.8 percent in 2010. The Washington-based lender now forecasts Greece’s deficit will be 5.9 percent of GDP this year and 6.7 percent in 2010. The government is expected to unveil new measures in October to cut spending and curb tax evasion to stem a swelling public deficit. The Economy and Finance Ministry has already raised taxes on cigarettes, alcohol, yacht owners and gambling and also frozen public sector wages in a bid to bring the budget gap to under 3 percent of GDP by 2010, as demanded by the European Commission. Still, the IMF report predicted Greece’s gross public debt will soar in 2009 to 109 percent of GDP and 116 percent in 2010, which will maintain the country’s status as the European Union’s second most-indebted nation after Italy. It also pointed to the need for renewed efforts on social security reform in view of projected high costs due to the aging population. The IMF report on Greece echoes other international organizations, which are also expecting negative growth in 2009, the first since 1993, after robust 4 percent expansion rates in recent years.