Greek contagion risks remain a concern, IMF says

Gazzetta team
Greek contagion risks remain a concern, IMF says
Contagion risks from Greece-related events to other euro area economies, while lower than earlier in the year, remain a concern, the International Monetary Fund (IMF) said in its World Economic Outlook report released on Tuesday.

The IMF noted that risks have diminished since the agreement on a new European Stability Mechanism program for Greece, but should policy and political uncertainty reemerge in the country, sovereign and financial sector stress in the euro area could also reemerge, with potentially broader spillovers.

The Fund’s economic estimates were in line with Greek government forecasts. The IMF expected the Greek economy to contract by 2.3 pct this year and by 1.3 pct in 2016, rising by 2.4 pct in 2020. It noted that a moderate economic recovery in the Eurozone meant that Greek economic prospects were clearly more negative following a protracted period of uncertainty which prevailed earlier in the year.

The IMF expects the inflation rate to remain in negative territory this year (-0.4 pct) rising to zero in 2016 and to 1.4 pct in 2020. The country’s current account balance is projected to record a surplus of 0.7 pct of GDP this year and to 1.5 pct of GDP in 2016, but returning to a 0.2 pct deficit in 2020. The unemployment rate is projected to rise to 26.8 pct of the workforce this year and to 27.1 pct in 2016.

The IMF revised lower its forecasts for global growth to 3.1 pct this year and to 3.6 pct in 2016, down from 3.3 pct and 3.8 pct in its spring forecasts, respectively.