{
  "title": "IMF Executive Board Concludes 2021 Article IV Consultation with Greece",
  "publication": "IMF News, July 16, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/07/16/pr2128-greece-imf-executive-board-concludes-2021-article-iv-consultation",
  "canonical": "https://www.imf.org/en/news/articles/2021/07/16/pr2128-greece-imf-executive-board-concludes-2021-article-iv-consultation",
  "overlayPath": "/en/news/articles/2021/07/16/pr2128-greece-imf-executive-board-concludes-2021-article-iv-consultation/index.md",
  "summary": "The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Greece and endorsed the staff appraisal on July 9 without a meeting on a lapse-of-time basis.",
  "publishDate": "2021-07-16",
  "sections": [
    {
      "heading": "Overview and context",
      "content": "- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Greece and endorsed the staff appraisal on July 9 without a meeting on a lapse-of-time basis.\n- Greece entered the pandemic with an unfinished recovery but demonstrated resilience; the economy contracted by 8.2 percent in 2020.\n- The government provided among the largest on-budget fiscal stimuli in the euro zone; supervisory and ECB accommodation shielded the banking sector and kept financing conditions highly accommodative.\n- Reforms progressed in a number of areas, albeit at a slower pace than in recent years.\n- Full vaccination is progressing at a rate above the European average, but a more prolonged pandemic would add unprecedented uncertainty and downside risks to all sectors."
    },
    {
      "heading": "Economic outlook and risks",
      "content": "- Growth projections:\n  - 2021: 3.3 percent\n  - 2022: 5.4 percent\n- Main drivers of the recovery: Next Generation EU (NGEU) grant funding investment, pent-up consumption funded by deposit drawdown, and tourism resumption.\n- Permanent output loss from the pandemic (“scarring”) is projected to reach 3 percent.\n- Downside risks highlighted:\n  - A more prolonged pandemic with significant downside impacts across sectors.\n  - Uncertain extent of pandemic-related Non-Performing Exposures (NPEs) that could affect securitization plans and curb credit growth.\n  - Weaker-than-anticipated absorption of NGEU funding.\n  - Reversal of global accommodative financial conditions.\n  - Manifestation of geopolitical risks.\n- Upside risks:\n  - Full execution of the authorities’ Recovery and Resilience Fund’s (RRF) plans could unlock synergies: higher investment, economies of scale from greater firm size, increased export orientation, productivity growth, movement to investment grade, and improved long-term debt sustainability.\n  - Such a virtuous cycle is subject to significant execution risks."
    },
    {
      "heading": "Public debt, fiscal stance, and sustainability",
      "content": "- Public debt dynamics:\n  - Public debt spiked in 2020, is projected to peak in 2021, and decline gradually over the medium-term while remaining at higher levels than forecast before the pandemic.\n  - Public debt remains sustainable over the medium-term, predicated on the negative interest rate-growth differential and a gradual return to primary surpluses.\n  - Uncertainty is too high to reach a definitive assessment on long-term debt sustainability due to uncertainty about the long-term neutral rate and risk premia.\n- Fiscal stance and recommendations:\n  - Pandemic-related measures imply a primary deficit of around 7¼ percent of GDP in 2021.\n  - Headline primary deficit for 2022 is expected to recover to 1 percent of GDP.\n  - Underlying fiscal stance for 2022, excluding temporary COVID-19 measures, remains expansionary by about 2 percent of GDP.\n  - Staff offers qualified support for maintaining fiscal accommodation in 2022, with conditionalities:\n    - Fiscal overperformance should be saved as a contingency reserve.\n    - Use additional support to initiate durable improvements in the fiscal policy mix.\n  - Recommended fiscal policy measures:\n    - Emphasize reductions in corporate income tax (CIT) rate and advanced CIT payments to strengthen investment incentives and preserve firm liquidity.\n    - Address gaps in the Guaranteed Minimum Income scheme to transition support from job retention to targeted income support and worker reactivation.\n    - Address unmet needs in healthcare provision.\n    - Match structural fiscal measures with efforts to create fiscal space over the medium term, including:\n      - Personal income tax base-broadening.\n      - Tackling VAT compliance gaps.\n      - Aiming for expenditure savings in less-well targeted entitlement programs (including pensions), in the public wage bill, and in State Owned Enterprises."
    },
    {
      "heading": "Financial sector, NPEs, and bank balance sheets",
      "content": "- The pandemic could delay normalization of bank balance sheets and requires a proactive government approach supported by comprehensive cost-benefit analysis of available options.\n- Hercules securitization strategy:\n  - Could achieve a rapid reduction in NPEs provided capital-raising efforts are successful.\n  - Staff welcomed the extension of additional government guarantees for NPE securitizations (“Hercules-II”).\n  - Staff suggested backup plans if fresh capital raising by banks is insufficient and/or execution risks materialize.\n- Asset Management Company (AMC) proposal by the Bank of Greece has been shelved; staff encouraged working with European partners to find solutions for weak quality of bank capital.\n- Stand-alone DTC conversion could be considered as a last resort for banks unable to fully utilize existing tools.\n- Staff encourages swift finalization of a DTC law amendment to ensure instruments are loss absorbing in resolution.\n- Effective implementation and use of the new Insolvency Code, including by servicers, is critical for meaningful debt resolution."
    },
    {
      "heading": "Structural reforms and NGEU implementation",
      "content": "- Structural reform implementation is essential to minimize scarring risks and leverage NGEU resources.\n- External position:\n  - The external position of Greece in 2020 is assessed to have remained weaker than consistent with medium-term fundamentals and desirable policies.\n  - Addressing overvaluation of the Real Effective Exchange Rate and strengthening convergence prospects requires accelerating structural reforms that boost productivity, reduce non-wage costs, and close the investment gap.\n- Recommendations to foster inclusive, job-rich, greener growth:\n  - Improve the fiscal policy mix to support labor force participation objectives, including funding childcare to encourage female labor participation.\n  - Invest in youth prospects and older worker reskilling.\n  - Upgrade the public investment framework to maximize NGEU funds’ impact.\n  - Upcoming labor codification should foster labor market flexibility.\n  - Minimum wage adjustment should be prudent.\n  - Continue safeguards for transparency and accountability of COVID-19-related emergency spending.\n  - Protect the independence and credibility of the statistical agency and uphold the “Commitment on Confidence in Statistics” endorsed by the government in 2012."
    },
    {
      "heading": "Key statistics (from Table 1)",
      "content": "- Population (millions of people): 10.7\n- Per capita GDP (€'000): 15.5\n- IMF quota (millions of SDRs): 2428.9\n- Literacy rate (percent): 97.9\n- (Percent of total): 0.5\n- Poverty rate (percent): 31.8\n- GHG emission per capita (tonnes of CO2 equivalent): 8.4\n\n- Selected annual indicators (2020, 2021 (prel./proj.), 2022 (proj.)):\n  - Real GDP growth (percent): -8.2; 3.3; 5.4\n  - Unemployment rate (percent): 16.4; 16.5; 15.2\n  - CPI inflation (period avg., percent): -1.3; -0.3; 0.8\n\n- General government finances (percent of GDP) 1/:\n  - Revenue: 50.2; 49.7; 49.2\n  - Expenditure: 60.7; 59.8; 53.3\n  - Overall balance: -10.5; -10.1; -4.1\n  - Primary balance: -7.5; -7.2; -1.1\n  - Public debt: 211.2; 213.8; 204.1\n\n- Balance of payments:\n  - Current account (percent of GDP): -7.4; -6.6; -3.5\n  - FDI (percent of GDP): -1.5; -2.0; -2.1\n  - External debt (percent of GDP): 303.9; 299.0; 285.6\n\n- Exchange rate:\n  - REER (percent change) 2/: -0.8; -0.9; -0.6\n\nIMF Executive Board Concludes 2021 Article IV Consultation with Greece (Press Release No. 21/218), July 16, 2021.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- IMF COVID-19 Hub\n- Policy Tracker\n- Financial Assistance\n- Questions & Answers\n- Greece and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/07/16/pr2128-greece-imf-executive-board-concludes-2021-article-iv-consultation"
    }
  ],
  "bullets": [
    "[Markdown version](/en/news/articles/2021/07/16/pr2128-greece-imf-executive-board-concludes-2021-article-iv-consultation/index.md)",
    "[Structured JSON version](/en/news/articles/2021/07/16/pr2128-greece-imf-executive-board-concludes-2021-article-iv-consultation/index.json)",
    "[Bundle manifest](/en/news/articles/2021/07/16/pr2128-greece-imf-executive-board-concludes-2021-article-iv-consultation/bundle-manifest.json)",
    "Published: July 16, 2021",
    "The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Greece and endorsed the staff appraisal on July 9 without a meeting on a lapse-of-time basis.",
    "Greece entered the pandemic with an unfinished recovery but demonstrated resilience; the economy contracted by 8.2 percent in 2020.",
    "The government provided among the largest on-budget fiscal stimuli in the euro zone; supervisory and ECB accommodation shielded the banking sector and kept financing conditions highly accommodative.",
    "Reforms progressed in a number of areas, albeit at a slower pace than in recent years.",
    "Full vaccination is progressing at a rate above the European average, but a more prolonged pandemic would add unprecedented uncertainty and downside risks to all sectors.",
    "Growth projections:",
    "Main drivers of the recovery: Next Generation EU (NGEU) grant funding investment, pent-up consumption funded by deposit drawdown, and tourism resumption.",
    "Permanent output loss from the pandemic (“scarring”) is projected to reach 3 percent.",
    "Downside risks highlighted:",
    "Upside risks:",
    "Public debt dynamics:",
    "Fiscal stance and recommendations:",
    "The pandemic could delay normalization of bank balance sheets and requires a proactive government approach supported by comprehensive cost-benefit analysis of available options.",
    "Hercules securitization strategy:",
    "Asset Management Company (AMC) proposal by the Bank of Greece has been shelved; staff encouraged working with European partners to find solutions for weak quality of bank capital.",
    "Stand-alone DTC conversion could be considered as a last resort for banks unable to fully utilize existing tools.",
    "Staff encourages swift finalization of a DTC law amendment to ensure instruments are loss absorbing in resolution.",
    "Effective implementation and use of the new Insolvency Code, including by servicers, is critical for meaningful debt resolution.",
    "Structural reform implementation is essential to minimize scarring risks and leverage NGEU resources.",
    "External position:",
    "Recommendations to foster inclusive, job-rich, greener growth:",
    "Population (millions of people): 10.7",
    "Per capita GDP (€'000): 15.5",
    "IMF quota (millions of SDRs): 2428.9",
    "Literacy rate (percent): 97.9",
    "(Percent of total): 0.5",
    "Poverty rate (percent): 31.8",
    "GHG emission per capita (tonnes of CO2 equivalent): 8.4",
    "Selected annual indicators (2020, 2021 (prel./proj.), 2022 (proj.)):",
    "General government finances (percent of GDP) 1/:",
    "Balance of payments:",
    "Exchange rate:",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[IMF COVID-19 Hub](https://www.imf.org/en/Topics/imf-and-covid19)",
    "[Policy Tracker](https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19)",
    "[Financial Assistance](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker)",
    "[Questions & Answers](https://www.imf.org/en/About/FAQ/imf-response-to-covid-19)",
    "[Greece and the IMF](http://www.imf.org/external/country/GRC/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
  "alternates": {
    "markdown": "/en/news/articles/2021/07/16/pr2128-greece-imf-executive-board-concludes-2021-article-iv-consultation/index.md",
    "json": "/en/news/articles/2021/07/16/pr2128-greece-imf-executive-board-concludes-2021-article-iv-consultation/index.json",
    "bundleManifest": "/en/news/articles/2021/07/16/pr2128-greece-imf-executive-board-concludes-2021-article-iv-consultation/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-26T00:33:42.861Z"
}