Positive for the growth potential of the Greek economy will be the package of measures, as presented by Prime Minister Alexis Tsipras at the Thessaloniki International Fair (TIF), which will be implemented in 2019.
In its current report, based on the assumption of no policy changes, the Commission estimates that the growth rate of the Greek economy will stand at 2% in the three-year period 2018-20, but notes that the final package of measures after the negotiations could lead to an expansion of the GDP by 2.3% in 2019.
It is worth noting that the European Commission recognizes the very likely recessional effect of the pension-cuts measure and one could perceive from the statements coming from Brussels that there is an increased probability of the non-implementation of the measure. In the report it is stressed that, through the preliminary draft budget submitted by the European Commission’s Finance Ministry, it has expressed the intention of replacing the pre-approved measures with an alternative package, the size and exact content of which “are under discussion and have not yet been incorporated in the forecasts” . Under these circumstances, it is noted that the forecasts announced today are likely to change.
Increase in positive measures
What’s interesting is the fact of the difference in the current estimates when compared to those of the preliminary draft budget, as to what the implementation of the pre-prescribed measures and countermeasures would mean. The economic staff of the government predicts, in the scenario of a stable policy, a primary surplus of 4.2% of GDP, while the Commission’s forecast is at 3.9% of GDP. This distance strengthens the information that the implementation of a EUR 765 million package of positive measures, without a cut in pensions, creates a budgetary gap of € 300 million. However, the Treasury Department believes that in the end the gap will be zero and the positive measures even higher.
Reduction in unemployment
In the other forecasts, estimates of the unemployment rate (19.6% of the workforce this year against a previous forecast of 20.1% and 18.2% in 2019 against 18.4%) appear marginally improved, while the budget surplus is forecasted at 0.6% of GDP over the three-year period, with the current estimate being slightly improved (0.4% and 0.2% the previous ones for the 2018-19 biennium). The forecasts for the structural surplus are also better, (4% of GDP this year instead of 2.5%, and 2.3% for next year instead of 1.6%).
With regard to debt, the picture is worse for this year, due to the “cushion”, ejecting it at 182.5% of GDP (previous forecast 177.8%). But then a significant decline is expected, to stand at 174.9% of GDP in 2019 and 167.4% of GDP in 2020./IBNA