The Finance Ministry is now downwardly revising its estimate for this year’s growth rate to 1.6 percent, from 1.8 percent, according to an internal document seen by Bloomberg.
A year ago the draft 2017 budget had projected that the economy would expand 2.7 percent this year, but the ministry later revised that estimate as the delay in wrapping up the bailout review in the first half of the year hurt economic activity.
The new revision that Bloomberg revealed brings the government’s forecast down to more pessimistic estimates by various entities and probably more in line with the European Commission’s fall forecasts that are due to be issued tomorrow.
The adjustment may not be dramatic but it will heighten concerns expressed by many parties that growth will be anaemic in the coming years. In that case, Greece will be unable to emerge from its crisis and the fiscal scenarios based on the optimistic forecasts for high growth rates will be ditched. New measures will then be required.
For now, the ministry is expressing optimism for 2018, raising its forecast to 2.5 percent growth against a previous 2.4 percent estimate in the draft budget.
For growth of 1.6 percent to be attained this year, given the 0.6 percent expansion in the first half, the second half will need to see the economy strengthen 2.6 percent. The previous estimate for an expansion of 1.8 percent would have required 3 percent growth in H2.
In its document the ministry attributes this year’s downward revision to the recent reduction by the Hellenic Statistical Authority (ELSTAT) of the 2016 gross domestic product level.
On Tuesday the ministry also rejected a report by the Parliament’s Budget Office (PBO) that had warned of the risk of bankruptcy for Greece unless the country’s debt is eased, given the high interest rates payable from 2021 to 2026. The ministry claimed the calculations were wrong, but the head of the PBO, Professor Panayiotis Liargovas, insisted there was no error in the report.