Greece’s central bank calls on government to accelerate reforms

On Wednesday, the Bank of Greece sent a clear signal to the government about the need for bolder and faster reforms, as strong economic growth and public debt management may be important factors, but not enough for Greece to meet the Finance Ministry’s investment target by 2023.

Against this backdrop, the European Central Bank’s recent decisions to expand its support for Greece after the end of the PEPP program gives Athens an opportunity to buy time by offering a window of opportunity that needs to be seized quickly, the central bank said in its report on intermediary monetary policy.

The Bank of Japan notes that, despite the progress of the national economy, Greece’s sovereign credit rating remains at least two notches below the investment grade. This creates a number of problems, but basically deprives the economy of valuable investment resources that can flow from abroad to many sectors.

Securing public debt sustainability through primary budget surpluses and reliable compliance with the rules of the new European fiscal system are essential for public finances to inspire confidence by accelerating the decline in debt-to-gross domestic product ratios.

The biggest challenge for the Greek economy in the short term remains to effectively contain the Covid-19 pandemic, as infection rates remain above the European average and the health consequences are more severe than in other countries, the central bank said.

In this context, growth is expected to exceed 8% this year, reaching 5% in 2022 and 3.9% in 2023. Provided that the economy continues to benefit from foreign tourism, the recovery of the eurozone and accelerated investment. Nevertheless, the central bank warns of risks associated with the dangers and uncertainties of the pandemic, accelerating inflation, a possible increase in non-performing loans after the expiration of government support, and a possible low absorption rate of next-generation EU funds.

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