IMF Says Greece Growth Outlook Still Weak as Debt Relief Elusive

  • Greek fiscal targets still unrealistic, IMF says after review
  • Prospects for long-term growth in Greece subdued, fund says

The International Monetary Fund said Greece’s growth outlook remains weak, with the country still requiring deep reforms and debt relief from its European creditors.

While Greece has made significant progress unwinding its macroeconomic imbalances, growth is elusive and risks are high, the IMF said Friday in a statement following the fund’s annual assessment of the Greek economy. The unemployment rate is expected to remain in the double digits until the middle of the century, said the Washington-based lender.

The fund expects the Greek economy to begin recovering next year, though long-term growth prospects are subdued, the IMF’s Greece mission chief Delia Velculescu told reporters on a conference call.

Greece continues to need deep reforms, including to its labor and product markets, to bolster the economy’s resilience, the IMF said. At the same time, European creditors need to provide more debt relief than what’s being considered, it said. Greece’s fiscal targets are unrealistic, including a goal for 3.5 percent primary surpluses for many decades, the fund said.

The nation needs to cut payments for existing pensioners in order to redirect welfare spending to socially vulnerable groups, Velculescu said. The labor market reforms carried out over the past few years shouldn’t be reversed, she added. Both issues point to possible disagreements with the Greek government in the next bailout review.

Less Austerity

“We are not advocating for more austerity,” Velculescu said. “We are advocating for less.”

The IMF expressed support in May for a deal between euro-area countries and Greece that paved the way for the release of 10.3 billion euros ($11.6 billion) to the country. At the time, the IMF said it was willing to consider a new loan for the country.

Velculescu said talks are ongoing on a possible new IMF loan.

“We are expecting to have a program with Greece, but we need both legs of the program,” Velculescu said, referring to the need for reforms and debt relief.

Before it's here, it's on the Bloomberg Terminal.