IOBE: Greek economy to grow by 1.5-2.0 pct this year

The Greek economy is expected to grow by 1.5 – 2.0 pct this year, the Foundation of Industrial and Economic Research (IOBE) said in its latest quarterly report on the Greek economy, released on Thursday.

IOBE said a budget target for a growth rate of around 3.0 pct this year was “very doubtful” and noted that a growth rate of around 1.5-2.0 pct “was not an insignificant level”.

The report noted that several of the economy’s functions were gradually recovering after the hit suffered in the summer of 2015. A recovery should not surprise anyone, while reforms in the labour and product markets contribute positively, although with a delay.

Strengthening of electronic payment means in the market is boosting GDP, along with tax revenue and reduces non-registered activity. “However, this positive reaction of the economy should not be misinterpreted of ensuring a course of sustainable growth in the medium-term,” IOBE said.

The report noted that the Greek economy, “although severely wounded, has not fallen below the level of Eurozone entrance and retains positive prospects. A new round of growth is feasible, but it cannot start automatically, as access to external capital will be limited. It needs a very clear political sign and social support. Then a significant increase in investments and a reversal of negative expectations will be visible”.

IOBE said the country needed a stable economic policy based on a credible direction without doubts for any possible deviations and warned that any delay in clearing the terms of economic growth created additional cost and risk on three issues: protecting those suffering from a drastic reduction in income, property and their living standards by creating a protection plan, raising the quality of health and education services. Secondly, uncertainty was freezing investment decisions and thirdly, the Greek crisis is evolving within a volatile and obscure European and international environment. Greece cannot afford to show a wait-and-see attitude towards any attempt to accelerate and deepen common policies in Europe (fiscal and banking).