Sunday, November 24, 2013
Greece needs new targeted measures, says IMF's Poul Thomsen
November 24, 2013
Why has the IMF been repeatedly too optimistic on growth, and how do you see the outlook for the economy now?
During the first year of the program, in 2010, the economy was on track with program projections. However, growth began to disappoint in step with growing political uncertainty and instability, which prompted fears of euro exit and drained deposits from the banks, liquidity from the economy, and confidence from investors.
Looking forward, the good news is that we are finally seeing clear signs the recession is bottoming out. We now expect that the decline in output will be less severe this year than projected a year ago—we have for the first time revised our estimates up rather than down—and I am confident that growth will turn positive next year. This is happening in large part because the Greek authorities’ determination to persist with difficult adjustment and reform policies, despite the challenging political and social environment, has significantly eased the fundamental uncertainty that until recently was weighing so heavily on investment and growth. Above all, the Government’s determination, together with continued strong support from Greece’s European partners, has dramatically reduced fears of euro exit.
But this does not mean that it is time to declare victory. The recovery is fragile and will falter unless the authorities continue to push ahead with fiscal consolidation and structural reforms. This is what we have been discussing in recent weeks: the policies needed to build on what has been achieved—to strengthen confidence and ensure that the recovery finally takes hold.