World Economy

Greece Cuts 2017 Growth Forecast

Greece Cuts 2017 Growth ForecastGreece Cuts 2017 Growth Forecast

Greece cut its 2017 growth forecast to 1.8% from 2.7%, according to a mid-term budget plan unveiled late on Saturday, driven by uncertainty caused by delays in concluding the latest review of bailout reforms.

Greece and its foreign creditors reached a deal on reforms in early May after six months of tense negotiations but the wrangling hurt economic activity. The Greek central bank governor had warned the delays could hobble economic recovery, Reuters reported.

The 2018-21 plan was submitted to parliament along with the reform deal which lawmakers need to approve. It forecasts growth of 2.4% in 2018 and 2.6% in 2019. The projections are lower than those of the EU Commission, which also cut its growth estimates last week to 2.1% this year from 2.7% forecast three months ago. GDP growth was also set to shrink to 2.5% in 2018 from previously estimated 3.1%, the commission said.

The government hopes that legislating the new measures by May 18 will allow its eurozone partners to approve the deal when they meet on May 22 and release a new tranche of bailout funds.

It also wants the ministers to sign off on the review to qualify for inclusion in the European Central Bank’s quantitative easing program and return to bond markets after three years of isolation.

The conclusion of Greece’s second bailout review will help the country outperform a downwardly revised EU forecast, the country’s government spokesman said on Thursday.

But the delays have already hurt economic activity in the crisis-hit country. “Once the review is concluded... I strongly believe that we will outperform the commission’s forecasts,” government spokesman Dimitris Tzanakopoulos told reporters adding the delays would not derail Greece’s fiscal efforts.

Greece will achieve a primary surplus–which excludes debt servicing costs–of 2% of GDP this year, versus a 1.75% target, Tzanakopoulos said.

He said that there was progress in debt talks. But there is no deal yet on Greece’s primary surplus targets over a decade after its €86-billion bailout, the third rescue package since 2010, expires in 2018.

Greece’s debt stands at 179% of gross domestic product. The lenders want Greece to maintain a 3.5% of GDP primary surplus for up to four years, according to draft documents seen by Reuters.

Debt sustainability is key for the International Monetary Fund which has yet to announce if it will contribute funds in the country’s EU-funded bailout.



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