Greek central bank chief expects modest growth after 6-year recession, warns recovery fragile

ATHENS, Greece – Greece’s outgoing central bank chief said Thursday that the country’s battered economy is on track to expand again after a punishing six-year recession, but warned that any slippage in reforms could still lead to disaster.

George Provopoulos said in a report that confidence is growing in the bailed-out country’s economy’s prospects and markets “anticipate a gradual exit from the crisis.”

The report expects the economy to grow 0.5 per cent this year, just below the government’s 0.6 per cent forecast.

But it warns that “the slightest backtracking or reversal” in economic reforms could cause instability and lead to Greece losing bond market access again.

In April, the country successfully sold its first bonds since it was priced out of the market more than four years ago, when international investors were spooked by the country’s soaring debt levels.

Greece has since then implemented harsh spending cuts, reforms and tax hikes to secure international bailouts. The deeply resented belt-tightening contributed to a depression-like economic slump, while unemployment shot up to record highs.

Data released Thursday showed unemployment was 27.8 per cent in the first quarter, unchanged from the last quarter of 2013 and slightly higher than a year earlier. The Statistical Authority figures showed unemployment remained highest among 15- to 24-year-olds, at 56.7 per cent.

The central bank report said that, despite progress in the public sector reforms, the government must still address delays and gaps in the program. It also stressed that over the next five years, further efforts are needed to rationalize public spending and improve tax administration.

The conservative-led governing coalition said Thursday it was continuing to meet its deficit targets. Preliminary figures showed a primary budget surplus of 711 million euros ($962 million) in January-May, about 500 million euros above target. The primary surplus does not include the cost of servicing the country’s crippling debt.