The Bank of Greece on Monday lowered growth prospects for 2019 to 1.9 pct, from a previous forecast of 2.3 pct and said that the country’s GDP grew by 1.9 pct in 2018, down from an initial 2.1 pct growth rate.
The state budget envisages a growth rate of 2.5 pct this year, while the European Commission in its winter forecasts said it expected Greek GDP to grow by 2.2 pct in 2019. The Bank of Greece said that despite significant progress made so far and reflected in significant economic figures, creating favourable prospects for the course of the economy, risks – both domestic and external – still remain. The main risk comes from the domestic environment and relates to a possible implementation of court decisions calling for the return of Christmas and Easter payments to pensioners, as any additional spending will burden the public debt sustainability analysis. Other domestic risks include high taxation and the fiscal policy mix in general, as well as a possible backtracking of reforms or delays in their implementation. Greece faces multiple elections in 2019, the central bank said, adding that a slowdown in the reform efforts and a stronger fiscal expansion strengthened economic uncertainty.
The Bank of Greece acknowledged that significant steps have been made in the management of non-performing loans, but noted that the NPL rate remains extremely high (December 2018: 45.4 pct from an EU average rate of below 4.0 pct). Credit institutions have commited to lower the value of NPLs to 34.1 billion euros by the end of 2021 (21.2 pct of total loans).