IMF Executive Board Concludes 2022 Article IV Consultation with Greece

IMF News, June 21, 2022

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The Greek economy recovered strongly from the severe COVID-19-induced recession, with output returning to the pre-pandemic level in 2021.
Growth projections:
- Real GDP growth (percent): 2021: 8.3; 2022 (proj.): 3.5; 2023 (proj.): 2.6.
Inflation projections:
- CPI inflation (period avg., percent): 2021: 0.6; 2022 (proj.): 6.1; 2023 (proj.): 1.2.
Main drivers of the recovery: strong fiscal response, accommodative monetary policy and prudential policies, and sizable EU support.
Risks and uncertainties:
- Significant downside risks from a further intensification of the war in Ukraine and remaining uncertainties associated with the pandemic.
- External position in 2021 was moderately weaker than consistent with fundamentals and desirable policies.

Directors welcomed:
- Stronger-than-expected economic recovery in 2021.
- Early repayment of all outstanding IMF credit (completed in April), which terminates the Post Financing Assessment.
- Progress on reforms addressing legacies from the debt crisis.
Overall policy guidance:
- Continue pursuing prudent policies and implementing growth-enhancing structural reforms to ensure debt sustainability and promote inclusive and greener growth.
- Fiscal policy should remain accommodative but well-targeted in 2022, then return to a gradual and growth-friendly consolidation with sustained primary surpluses thereafter.

Directors commended rapid reduction of non-performing loans in major banks and authorities’ commitment to address remaining challenges.
Recommendations to strengthen financial resilience:
- Implement the new insolvency law to reduce distressed debt.
- Improve banks’ credit risk management and develop viable long-term restructurings.
- Strengthen capital buffers and the quality of capital.
- Restore sound profitability drivers, address medium-term funding challenges, and adapt business models.
- Prepare a conditions-based roadmap to guide activation of macroprudential tools in the medium term should systemic vulnerabilities emerge.

National Recovery and Resilience Plan (supported by Next Generation EU funds) is a key opportunity to:
- Cement past reform achievements.
- Address structural bottlenecks, including in the labor market.
- Raise growth potential and ensure sustainable, job-rich, and greener growth.
Minimum wage and social policies:
- Directors noted the positive impact of the minimum wage increase on households’ purchasing power and recommended monitoring potential effects on inflation and youth unemployment.
- Welcomed authorities’ commitment to climate-friendly policies and stressed need for a stronger social safety net—potentially financed by higher carbon taxes when conditions allow—to facilitate the green transition.

Balance of payments indicators:
- Current account (percent of GDP): 2021: -6.5.
- FDI (percent of GDP): 2021: -2.2; 2022 (proj.): -2.9; 2023 (proj.): -2.5.
- External debt (percent of GDP): 2021: 310.1; 2022 (proj.): 287.0; 2023 (proj.): 279.6.
Exchange rate:
- REER (percent change, CPI-based): 2021: -2.0; 2022 (proj.): -0.4; 2023 (proj.): -1.1.

Population (millions of people): 10.7
Per capita GDP (€'000): 15.5
IMF quota (millions of SDRs): 2428.9
Literacy rate (percent): 97.9
Poverty rate (percent): 27.4
(Percent of total): 0.5
GHG emission per capita (tonnes of CO2 equivalent): 8.4
Main products and exports: tourism services; shipping services; food and beverages; industrial products; petroleum and chemicals.
Key export markets: E.U. (Italy, Germany, Cyprus, Bulgaria, Spain), Turkey, USA, UK.

IMF Communications Department — Press Release No. 22/218, June 21, 2022