Cyprus Mail

Greek Central Banker sees recession bottoming out, easing on capital controls

Bank of Greece governor Stournaras attends the annual ordinary general meeting of the bank's shareholders in Athens

Greece’s central bank maintains a forecast of a mild 0.3 per cent contraction in output this year as the government has proposed a further easing of capital controls in the country, Central Bank Governor Yiannis Stournaras said on Monday.

Stournaras told parliament there were growing indications a recession in the country was bottoming out, but said there should be no complacency in pursuing reforms outlined in a multi-billion euro bailout deal with international creditors.

“Any delay in adopting reforms and privatisations which are outlined in the programme could stunt an expansion in output, resulting in fresh uncertainty, a climate of trust undermined and weaker prospects of finally exiting this crisis,” said Stournaras.

Greece almost toppled out of the euro zone in 2015 when it plunged into financial turmoil from protracted talks with lenders on new funding, resulting in the imposition of capital controls on banks to stem a flight of funds.

Those controls, which have gradually been eased, will be eased further as confidence returns in the country’s banking system, Stournaras said.

On Monday, he added, Greek authorities consulted lenders on lifting restrictions further. That included no restrictions on withdrawals for new deposits and allowing withdrawals for loan repayments.

The policymaker, who also sits on the governing council of of the European Central Bank, said he expected the country to show signs of returning to growth in the second half of 2016.

For the whole year, he maintained his forecast of a 0.3 per cent decline in output, after a 0.2 per cent decline in 2015. The economy was expected to grow by 2.5 per cent in 2017 and 3.0 per cent in 2018.

Those projections, he said, were based on the assumption that uncertainty would abate, there would be a resurgence in demand and ECB’s monetary policy would remain “accommodative”.

The ECB would also examine the possibility of buying government bonds worth up to 3.7 billion euros after the end of July, as part of the quantitative easing programme, he added.

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