Greek debt reduction in absolute numbers begins!

Greek debt reduction in absolute numbers begins!

The debt reduction for 2019 is foreseen by the State Treasury, as is evident from the preliminary draft state budget. For the first time in recent years, general government debt is projected to drop to EUR 329.3 billion, down from the EUR 334.57 billion in 2018.

In terms of GDP, in fact, the decline will be very large as the rate is 181.1% from its historical high of 2018 and is expected to fall to 173.3% in 2019. As for 2020, a slight increase of the debt in absolute numbers (from EUR 329.3 billion to EUR 331 billion) is foreseen, but it will continue to fall as a proportion of GDP. Thus, by 2020, debt will stand at 167.8% of GDP, which will rise to EUR 197.315 billion versus EUR 190.004 billion, as a result of the strong growth rate estimate of 2.8%.

IMF repayment

The estimation that in 2019 will be recorded for the first time in years a reduction of government debt in absolute numbers is mainly based on the prediction that the IMF’s expensive part of the loan will have been completed by the end of the year. Given this amount is EUR 2.7 billion, completing the process will result in this year’s disbursements being less than the expense of “net” debt repayment (excluding interest).

Interest expense on central government debt stands at 5.5-6.2 billion, while interest expense stands at around 3% -3.3% of GDP. The reduced interest expense in recent years is due to the reduction in the amount of government debt after the March 2012 bond exchange (PSI) and the December 2012 repurchase, the reduction of the interest rate of the stability mechanism loans and the deferred interest payments on loans provided by the European Financial Stability Fund, as provided by the Greece-Institution Agreement in the summer of 2018./ibna