Giannis Stournaras sent a message of vigilance for the Greek Economy despite its positive performance, presenting today his annual Report as governor of the Bank of Greece during its General Assembly.
As he specifically stated, “despite the continuous positive assessments of the Greek economy in recent years, the restoration of fiscal balance and the strengthening of fiscal awareness among policy makers, there is no room for complacency.”
The distance between Greece and Eurozone countries is long
And this is because, as he explained, even though the benefits of the reforms are now evident in the economy, with measurable and indisputable results, there is still a long way to go for Greece’s credit rating to converge to the average of the eurozone countries.
Need for prudent economic policy
In this context, the exercise of a prudent economic policy characterized by consistency, medium-term rational planning and measurable objectives is required. A necessary condition is also the continuation of reforms, especially those related to the functioning of institutions and strengthening the structural competitiveness of the economy.
Historic opportunity
“Greece has the historic opportunity to complete the transformation of its economy, converging towards the European average,” he said characteristically.
Regarding the forecasts for the course of the economy in 2024, the Bank estimates that its growth rate will accelerate to 2.3%, well above the eurozone average. Private consumption and investment will continue to be key drivers of growth, while the contribution of the external sector will be marginally negative, as strong investment activity will significantly increase imports. The tourism sector shows positive prospects again this year, despite the international uncertainty.
The BoE estimates that in 2024 the conditions will be created for a reduction in domestic bank interest rates, as inflation will gradually decelerate and the ECB’s key interest rates will begin to decrease.
De-escalation of inflation
Headline inflation is expected to decline further in 2024 to 2.8%, as all individual components show deceleration trends, despite the climate of uncertainty created by geopolitical developments.
For the primary nowsong
In the fiscal field, the BoE estimates that in 2024 the primary surplus will increase to 2.1% of GDP. This improvement is mainly explained by the projected increase in tax revenues and income from insurance contributions due to the strong growth rate of the economy.
For public debt
Public debt is projected to further decelerate to 152.3% of GDP in 2024, at a slower pace than in the previous three years, as falling inflation is expected to offset both the acceleration in real GDP and the dampening effect of enlargement of primary surplus. In addition, the public debt is forecast to decrease in nominal terms for the first time since 2019.
The financial sector
Regarding developments in the financial sector, Mr. Stournaras underlined that the challenges of the economic environment require further strengthening of the resilience of Greek banks, as despite the remarkable improvement in asset quality in recent years, it should not lead to complacency.
In this context, the challenge for the sector remains the further improvement of the capital base of Greek banks, both quantitatively and qualitatively, as definitive and settled deferred tax credits (DTCs) still constitute a large part of their regulatory capital.
At the same time, as he mentioned, a more intensive effort is required to further reduce the NPLs to the level of the European average. Also, banks, systemic and non-systemic, should further strengthen their capital reserves by taking advantage of increased organic profitability, which creates favorable conditions for internal capital formation. The creation of a “fifth pole” of recapitalized non-systemic banks is expected to improve the conditions of competition in the domestic financial system and the financing conditions of small and medium enterprises
For the high private cost
In addition, addressing high private debt outside the banking sector will facilitate access to bank financing for businesses and households.
Call the banks
Mr. Stournaras called on the managements of the banks to contribute to the provision of sustainable regulation solutions for the “sustainable” borrowers, at the same time proceeding with the liquidation of collateral for the remaining cases,
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