Greece: Government admits 7.9% downturn

Greece: Government admits 7.9% downturn

A big recession “wave” is expected to drag the Greek economy, with the optimistic scenario projecting a 4.7% recession and the negative one 7.9%, according to the Ministry of Finance. At the same time, according to the same forecasts, a primary deficit of 1.9% will be included in the baseline scenario which will grow to 2.8% in the unfavorable one, alongside an increase in unemployment to 19.9% ​and an “explosion” of public debt at 188.8% of GDP from 176.6% last year.

To the extent that the recession this year stays at 4.7%, in 2021 there will be a recovery of a 5.1% rate. If the unfavorable scenario is confirmed, then after this year’s 7.9% plummet an 8% growth will follow in 2021.

After last year’s surplus of 4.4% of GDP (ESA 2010 or 3.5% of GDP in terms of program), in 2021 we will be back to a primary surplus of 2.5% of GDP. Total government revenue fell to 46.7% of GDP this year (from 47.8% last year) but…. it is going up to 47.3% of GDP in 2021, while total expenditure will climb to 51.4% this year from 46.8%, before returning to 47.5% of GDP in 2021.

Apart from that, public debt is expected to rise from 331.1 billion euros in 2019 to 337 billion euros this year and fall to 334 billion euros in 2021. In terms of GDP percentage this year, the Ministry of Finance sees a boom at 188% of GDP (from 176.6%), miles away from the IMF and the investment banks’ forecasts expecting that the 200% barrier would be broken. In 2021, a return of 176.8% of GDP is projected.

At the same time, the Public Debt Management Organization announced late last year that it would proceed with debt issues of up to 8 billion euros this year. We will in fact borrow the 8 billion euros, leaving the alternatively lower scenarios aside. In fact, the Stability Program states that there will be changes in the lending strategy, but there will be no increase in the limit. With reference to plans to reduce the volume of interest-bearing bills and new early repayments of IMF loans or other public debt management operations, it is implied that these plans will be put on hold. /ibna