Athens, May 4, 2016/Independent Balkan News Agency
By Spiros Sideris
The Greek economy will return to growth in the second half of 2016, according to the spring economic European Commission forecasts released yesterday in Brussels.
In its report on Greece, the Commission stresses that the Greek economy has shown remarkable resilience in 2015.
According to the Commission, growth is expected to return in the second half of 2016 and strengthened in 2017, thanks to the restoration of confidence and structural reforms. It is also noted that the budget deficit of the state is expected to decline further, after the improved fiscal data for 2015 and the completion of the financial package of EUR 5.4 billion.
The Commission notes that in 2015, the recession of the Greek economy, due to the imposition of capital controls, was milder (-0.2%) than expected. The economic downturn is projected to reach 0.3% in 2016, slightly improved compared to the winter forecast, driven by domestic consumption, exports and another positive year for tourism. The Commission considers that the uncertainty will decline with the completion of the Greek program evaluation, which is expected to support the gradual relaxation of capital controls and to stimulate investment. 2017 is expected to enhance growth by stimulating domestic demand, the help of the Structural Funds and the injection of liquidity through payment of outstanding government debt.
Regarding unemployment, the Commission notes that it will continue to decline throughout the forecast period, noting that to this contributed to the reforms in the labour market in recent years.
However, the Commission notes that uncertainty remains high and that the anticipated recovery of the economy dependent on the timely completion of the first evaluation and the positive reaction of the financial markets. According to the Commission, the most positive scenario could come from the fast restoration of consumer and business confidence. The most negative scenario could result from a possible failure of the full implementation of the reform program, a more negative impact of the refugee crisis in trade and tourism, and by the slowdown in world trade.
Continuing, the Commission stresses that the resilience of the Greek economy and the fiscal adjustment in the second half of 2015 contributed so that Greece can achieve a primary surplus of 0.7% of GDP, exceeding the target of the program (-0.25% of GDP) . The recapitalization of banks that was completed in late 2015 raised the deficit to 7.2% of GDP in 2015. Despite the over-performance of 2015 the Greek Government provides measures of 3% of GDP by 2018 in order to achieve the objectives of the program for the primary surplus of 0.5% of GDP in 2016, 1.75% in 2017 and 3.5% in 2018.
The Commission’s report also points out that the adjustment package includes reforms to social security, 1% of GDP, reforms of income tax of 1% of GDP, changes in VAT 0.25% of GDP and adjustments to public spending 0.75% of GDP.
The budget deficit is projected to decline to 3.1% of GDP in 2016 and to 1.8% of GDP in 2017.
Public debt is expected to increase to 182.8% in 2016, due to the arrears and tranches under the program. The downward trend of the debt is expected to start in 2017.
According to the Commission, the negative scenario for the budgetary projections could come from greater costs deriving from the situation with the refugees and possible delays in implementing reforms. The more positive scenario could come from reforms on the revenue and the effective tax collectability.