IMF Executive Board Concludes 2025 Article IV Consultation with Greece

IMF Executive Board Concludes 2025 Article IV Consultation with Greece

April 4, 2025

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation^[1] with Greece on March 31, 2025.

Greece's near-term economic outlook remains favorable, with real GDP sustaining its robust expansion. Real GDP growth is projected to remain high at 2.1 percent in 2025. Investment will continue to be a key driver, supported by NGEU-funded projects. Private consumption growth will remain solid, underpinned by favorable employment and income growth. With stabilizing global energy prices, headline inflation is expected to resume its downward trend, while core inflation will be more persistent due to services inflation and wage growth.

The banking system has further enhanced its resilience underpinned by balance sheet strengthening. Asset quality in systemically important banks has improved further, with the Non-Performing Loan ratio dropping to around 3 percent. Banks sustained high profits, which, along with capital instrument issuances, have boosted capital adequacy. Liquidity and funding risks have been markedly reduced, with buffers well above prudential requirements and the EU average.

Risks to the growth outlook are balanced, while those to inflation are tilted upward. Potential headwinds include the growth slowdown in major euro area countries, a deterioration of regional conflicts, and global policy uncertainty. The acceleration of ambitious structural reforms could further improve growth prospects. Stronger- and more persistent-than-expected wage growth could further fuel services inflation, potentially exacerbated by fluctuations in global and regional energy prices.

Executive Board Assessment^[2]

Executive Directors welcomed the continued robust expansion of the Greek economy, the favorable near-term economic outlook, and the firm downward trajectory of the public debt-to-GDP ratio which however remains high. Noting the eventual phase-out of Next Generation EU funding, and the impediments to medium-term growth prospects arising from remaining crisis legacies and structural imbalances, Directors called for the right policy mix and ambitious structural reforms to help sustain robust growth, ensure fiscal sustainability, and safeguard financial stability.

Directors commended the strong progress on fiscal consolidation, driven by strong revenue performance partly due to recent reforms to reduce tax evasion. They agreed that maintaining primary surpluses above 2 percent of GDP in the medium term will further enhance debt sustainability and build buffers against future shocks. Noting the substantial investment needs, including for the green transition and energy security, they recommended prioritizing public investment to help achieve sustainable growth, while improving social expenditure efficiency and containing spending pressures especially on pensions and public-sector wages.

While welcoming recent structural reform progress, Directors emphasized the importance of further comprehensive efforts to address supply-side structural impediments and boost potential growth. They stressed that raising labor force participation, particularly for women, and cultivating a better-skilled workforce would enhance growth prospects. They agreed that reducing regulatory burdens and barriers to entry for firms, especially in service sectors, would foster competition and increase productivity. Broad progress in judicial system reforms would help address crisis legacy debt, safeguard financial stability, and further enhance business dynamism and productivity. Moreover, they supported continued progress in the green and digital transition to help achieve energy security and further boost productivity growth.

Directors welcomed enhanced financial sector resilience, with improved bank profitability and reduced liquidity and funding risks, while noting that pockets of vulnerabilities remain. Amid accelerating credit growth, they emphasized that close monitoring of risks associated with credit exposure is warranted. They welcomed the activation of a positive neutral countercyclical capital buffer and borrower-based measures for mortgage loan borrowers, and recommended calibrating macroprudential toolkits to align with emerging risks. Directors also recommended that currently elevated bank profits should be primarily utilized to enhance capital buffers and their loss-absorption capacity, thus enhancing banks' resilience.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.