Returning to growth
The
Greek economy is expected to return to growth in 2014. Following a weaker than
expected first half, GDP growth in seasonally-adjusted terms became positive in
the second quarter this year, and a strong third quarter figure is expected.
After
strengthening throughout 2014, the Economic Sentiment Indicator and the
Purchasing Managers’ Index began to weaken towards the end of the summer. The
persistently tight credit conditions and slow absorption of EU and EIB funds
continue to be a significant constraint on the recovery of investment. However,
private consumption is expected to rebound fast and exports to continue
performing strongly owing to the tourism and shipping sectors. Greece’s economy
is projected to grow by 0.6% in real terms this year.
Τhe
recovery is projected to gain strength next year. However, uncertainty over
policy implementation looks set to continue weighing on investment decisions in
the first half of 2015. Private consumption growth is supported by low
inflation expectations, increases in disposable income and the use of
precautionary savings held outside the banking system during the crisis.
Exports are projected to surge in 2015, supported by the euro’s depreciation
and gains in competitiveness and quality of the business environment. As a
result, real GDP is forecast to pick up markedly to 2.9% in 2015.
In
2016, real GDP is projected to continue expanding by 3.7%, as investment gains
momentum and the economy begins to reap the benefits of ongoing structural
reforms.
Greece’s
current-account deficit is projected to reach 2.8% of GDP in 2014 and then
improve to 2.5% in 2015 and 2.2% in 2016, as exports pick up with the recovery and benefit from reforms.
Unemployment is expected to drop to 26.8% in 2014 reflecting the creation of new jobs and the effect of employment support programmes. A relatively strong fall in unemployment to 25.0% in 2015 and 22.0% in 2016 can be expected thanks to the pick-up in investment, the continuation of employment programmes, and ongoing structural reforms bearing fruit.
Consumer prices are expected to fall moderately by 1.0% in 2014, reflecting falling unit labour costs and the implementation of product market reforms, notably to remove distortions and increase competition in the retail, health and energy sectors. As the economic recovery gains pace, prices are expected to increase by 0.3% in 2015 and 1.1% in 2016.
Uncertainty a major risk
Greece’s
GDP growth could turn out weaker than forecast if uncertainty on policy
implementation has a stronger-than- projected effect on confidence and
investment, or if geopolitical events have a bigger-than-expected impact in the
region. On the upside, exports may exceed expectations and investors’
confidence could pick up owing, in particular to the successful processing of
non-performing loans and to the positive results of the Asset
Quality Review and stress tests. Overall, the balance of risks points to the
downside since uncertainty is significant for the next few months.
The budgetary situation is improving
The
general government headline balance deteriorated to 12.2% of GDP in 2013, from
8.6% of GDP in 2012 mainly because of the temporary costs of bank
recapitalisations which amounted to 10.4% of GDP in 2013 and 2.9% in 2012.
However, the underlying fiscal situation improved significantly last year.
In
2014, the headline deficit is projected to fall to 1.6% of GDP, given the
one-off nature of banking support costs in 2013 and continued budgetary
improvements such as a major income tax reform and expenditure consolidation. This
forecast assumes that, as in recent years, the government exerts close controls
on spending towards the end of the year to ensure that its 1.5% of GDP primary
surplus target for 2014 is met.
The
projections for 2015 and 2016 assume that Greece will meet the 3.0% and 4.5% of
GDP primary surplus targets of its programme as a result of the
fiscal-structural reforms under Greece’s programme and the improved economic environment.
Accordingly, Greece would record a headline general government surplus of 1.3%
of GDP in 2016. The fiscal adjustment and the structural reforms during the
past years have improved significantly the Greece structural fiscal balance and
turned it into a sizeable surplus.
The
government’s debt-to-GDP ratio is expected to stabilise this year, before
declining markedly in 2015 and beyond, as the primary surplus continues to
improve and economic growth continues. Minor bank recapitalisation needs
following the stress tests are expected to result in lower borrowing from the
EFSF reducing the debt ratio accordingly.
(37)
Note that updated forecasts will be
released in the forthcoming Compliance Report on the 2nd
Economic Adjustment Programme of Greece. These will be based on quarterly ESA
2010 for Greece which will be available for the first time in the course of
November 2014.
Δεν υπάρχουν σχόλια:
Δημοσίευση σχολίου