AFTER MONTHS OF Greece’s new, anti-austerity government tussling with bailout lenders over its mountain of debt, the country has found an unlikely champion.
The IMF – one of its major creditors – has predicted the Mediterranean nation will outstrip Ireland as Europe’s fastest-growing economy next year.
In its latest world outlook, it forecast the Republic would have the biggest increase in GDP of any country among advanced economies this year.
But the IMF expects the Greek economy to leap ahead in 2016 with a growth rate of 3.7% – compared to its prediction of under 3.3% for the Republic.
The forecast comes amid reports the left-wing Syriza government has been gearing up to default on €2.5 billion in IMF repayments due in May and June.
Here’s how the two countries’ actual past – and predicted future – economic growth figures look side by side:
While it wasn’t clear what assumptions the IMF was using for its latest outlook, its forecasts aren’t far below the growth staff were expecting under the previous, right-wing Greek administration.
In its mid-2014 assessment, well before Syriza came to power, it forecast the same GDP growth of 3.7% next year, but slightly higher figures than the latest assessment going into 2017 and beyond.
Greek crisis still looming
The IMF’s head of research, Olivier Blanchard, yesterday said the risk of a recession in the eurozone had “decreased substantially”, but other potential pitfalls like an “intensified” Greek crisis were still present.
“We are clearly in the middle of negotiations with the Greeks – we very much want to come to an agreement and we hope we will,” he said.
Now, what happens if no agreement were reached? I think that a number of things are fairly clear. The first one is that, say, an exit from the euro would be extremely costly for Greece. It would be extremely painful.
The second point is that, looking at the rest of the Eurozone, the rest of the Eurozone is in a better position to deal with the Greek exit. Some of the firewalls which were not there earlier are there. Still, it will not be smooth sailing, but it could probably be done.”
A tale of two debts
Official figures from Greece today showed its debt hit 177% of GDP in 2014. In comparison, Ireland’s borrowing peaked at about 124% of GDP last year – and dropped slightly to under 115% by the third quarter of last year.
Greece’s economy also fell into a much bigger hole than that of Ireland during its recession. In 2020, the country’s total output is expected to still be 11% below its 2007 peak, while by the same stage Ireland’s GDP is forecast to be 16% ahead of the previous high-water mark.
However the IMF’s estimates for Ireland are notably below those coming from the country’s most-bullish economists, who are expecting bigger things from the country over the next few years.
IBEC recently predicted the Republic’s GDP would increase a stunning 5.4% this year, compared to the IMF’s recently increased forecast of 3.9%. The Central Bank expects a growth rate of 3.8%.
To embed this post, copy the code below on your site
have your say