ASSESSMENTS

For Greece, Clouds Linger on the Horizon

Jan 23, 2019 | 10:00 GMT

Pensioners march in central Athens on Dec. 15, 2018, during a demonstration to demand the return of pension funds lost as part of austerity measures. Greece will be in for a bumpy 2019.

(ANGELOS TZORTZINIS/AFP/Getty Images)

Highlights

Greece's economy is much more stable than it was five years ago, but ongoing political turbulence will weaken Athens' commitment to economic reform this year.
Domestic and foreign factors will moderate Greece's economic growth, making it hard for the country to reduce its massive debt burden.
The government's failure to immediately implement economic reforms could delay the introduction of debt relief measures that Greece's creditors promised Athens last year.
Greek banks will remain vulnerable to capital outflows, as they are still dealing with high numbers of nonperforming loans.

In many ways, 2018 marked a turning point for Greece. The economy grew by around 2 percent – its strongest expansion in a decade – while unemployment dropped below 20 percent of the active population for the first time since 2011. More importantly, Greece ended its third bailout program, which means that the country's lenders will no longer keep Athens on such a tight leash (although they will retain some degree of oversight). It was also an important year in terms of foreign relations, as the country finally reached a name deal with Macedonia to end decades of bilateral frictions. 2019, however, will be a challenging year for Greece, as the economy still faces significant challenges amid increasing turbulence in its domestic politic scene. Greece might no longer represent an immediate threat to the continuity of the eurozone, but the risk of contagion, especially to other Mediterranean economies, is never...

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