Parts of Greek economy will be unreformed post-bailout

Significance

Greece will re-enter international capital markets solely on the strength of its economy, after a near-decade-long recession that wiped out one-quarter of its output and left one-fifth of the working population unemployed. Although Greece turned a corner in 2017, with year-on-year growth that continued into the first quarter of 2018, the economy remains fragile and continuing reforms depend on the government’s willingness and ability to adhere to the reform agenda.

Impacts

• The burden of non-performing loans on banks’ balance sheets (close to 50%) will constrain credit growth and slow down economic recovery.
• In the long term, an ageing population will weigh heavily on the public finances, complicating achieving agreed primary budget surpluses.
• A shift towards temporary and part-time employment will delay recovery in productivity levels.