Greece’s economy will only grow by up to 1.5 per cent this year, the leading IOBE think tank said on Wednesday as it trimmed its forecast due to slow progress on the country’s bailout review.
IOBE had projected 1.5 to 1.8 per cent growth this year in its previous estimate in January, compared to the 2.7 per cent forecast by the government, but has cut that estimate as the protracted review of the bailout has increased uncertainty.
The review was supposed to be wrapped up late last year.
“The bailout review, once again a protracted process, has consequences that we have seen in the past – it exacerbates uncertainty.” the think tank said in a quarterly review.
“Households and businesses put off decisions until the new fiscal measures and reforms are finalised, which has a negative impact on economic activity.”
The talks over energy and labour reforms, pension cuts and tax hikes have dragged on for months, mainly due to differences between EU lenders and the International Monetary Fund over the country’s fiscal targets after its bailout expires in 2018.
Greece has agreed to implement more austerity after its 86 billion-euro bailout package ends, the third rescue plan since the debt crisis began in 2010, to persuade the IMF to participate financially in its programme, as sought by Germany.
The negotiations resumed in Athens this week and Greece hopes a deal can be reached by May 22, when euro zone finance ministers will discuss the issue. Concluding the review will also unlock funds which Athens needs to repay loans maturing in July.
IOBE expects Greece’s jobless rate, the highest in the euro zone, to continue to decline for the fourth consecutive year in 2017 to 22.2 per cent, but at a slower pace than last year.