Greece could be close to returning to sustainable economic growth at last after almost a decade of devastating recessions and crises, economists believe.

The country’s government is getting closer to restoring a degree of financial stability through the latest round of talks with the EU and the International Monetary Fund. After several false dawns, UBS’s chief economist for the region hopes that only a few more steps could be required to put the troubled economy firmly on the right track.

Gyorgy Kovacs believes that finalising the debt relief plan combined with Greece’s inclusion in the European Central Bank’s bond-buying programme would be one serious improvement, and that further improvements in economic sentiment, with the liberalisation of capital controls, is another.

“What we have seen is that, compared to the first quarter, there has been a positive turn in the economy. If we add on top of that the closure of the review, hopefully it will bring improved confidence into Greece,” he said.

“Hopefully it will allow the end of capital controls, or the easing of those.”

Fewer capital controls should give companies and individuals a greater incentive to put money into the country and its banks, as they would be free to remove it at will.

Mr Kovacs also hopes that the repayment of arrears by the government to the private sector should boost confidence and investment further.

“The more significant fiscal consolidation is to a certain extent behind us, which suggests we should see some economic recovery this year,” he said.

“The tourism season is looking at good indications, so yes I think it is going to happen.”

“The big question is how big the recovery in investment spending could be – it would be the signal for a more sustained recovery.”

Credit ratings agency Standard and Poor’s upgraded the outlook on Greece’s B-minus credit rating to “positive” in a move which will boost the government’s confidence as it looks to return to the bond markets.

“We believe recovering economic growth, alongside legislated fiscal reforms and further debt relief, should enable Greece to reduce its general government debt-to-GDP ratio and debt servicing costs through 2020,” said S&P.

Athens is seeking to raising fresh cash from the private sector for the first time in three years. A careful first step back into the markets indicates that the government believes its own finances are getting back on track, and that private investors may be prepared to trust it once more.

After a series of haircuts left investors out of pocket, Greece has been reliant on public sector funds from the EU and the IMF, but needs to be able to support itself on the markets once the current bailout programme ends.

A successful bond issue could promote more private investment in the economy by boosting business confidence and proving that the nation is winning over the investors which once shunned it.

S&P said that extra financial support from the Eurogroup “is likely to pave the way for Greece to successfully reenter sovereign bond markets this year.”

Christine Lagarde
The IMF’s chief Christine Lagarde said the country is taking the right steps to reform its economy and its public finances CREDIT: MICHEL EULER/AP PHOTO

The IMF approved another €1.6bn stand-by arrangement for Greece on Friday which can be used once EU institutions give assurances to the IMF on Greece’s debt sustainability.

The Fund’s managing director Christine Lagarde said that the government is making progress on the economy, pointing to steps to widen the tax base and limit pension spending as evidence of sensible action.

“I strongly welcome Greece’s new economic adjustment program, which focuses on policies that will help restore medium-term macroeconomic stability and growth, and supports the authorities’ efforts to return to market financing on a sustainable basis,” she said.

“The program provides both breathing space to mobilize support for the deeper structural reforms that Greece needs to prosper within the euro area, and a framework for Greece’s European partners to deliver further debt relief to restore Greece’s debt sustainability.”

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