By Nikos Chrysoloras and Sotiris Nikas
The European Commission has upwardly revised its forecast for Greece’s primary surplus next year and confirmed the prospect that the recession will end this year.
In its fall forecasts Brussels significantly increased its estimate for Greece’s 2014 primary surplus from 1.8 percent of gross domestic product foreseen in spring to 2.8 percent. This was one the government’s main arguments in its talks on Tuesday with the representatives of its creditors concerning the fiscal gap expected for next year, but the troika responded that the surplus is due to interventions of a temporary character.
According to sources, the difference between the projected 2.8 percent estimate and the 1.5 percent target of the bailout agreement is due to the fact that the latter does not include expenditure on the banking system, the transfer of profits other eurozone member states have made on Greek bonds, the retroactive reduction of interest on the bilateral loans of the first bailout agreement and the adjustment regarding the last installment of the property tax for 2012.
The Commission adds in its report that its current estimates are based on the presumption that any fiscal gaps to appear in the 2014-15 period will be covered via measures currently under discussion in the government’s ongoing negotiations with its creditors.
Brussels further estimates that the cycle of recession will end this year with a 4 percent GDP contraction, followed by a 0.6 percent rebound in 2014 and growth of 2.9 in 2015. It also makes special reference to how well tourism is doing in Greece.
Its projections include a drop in unemployment from 27 percent this year to 26 percent in 2014 and 24 percent in 2015. Investment is seen increasing by 5.3 percent next year and a further 11.3 percent in 2015. The balance of payments will show a deficit of 2.3 percent of GDP in 2013, dropping to 1.9 percent in 2014 and 1.6 percent the year after. Salaries per employee in the whole of the economy will drop 7 percent this year and by another 1.5 percent next year before stabilizing in 2015. Finally, Greece’s debt will reach 176.2 percent of GDP at end-2013 before dropping to 170.9 percent by 2015.