The Finance Ministry and the country’s international creditors agreed on Tuesday that the revised forecast for this year’s economic contraction is 4 percent, against a previous estimate of 4.2 percent and a ministry forecast for 4.5 percent negative growth in the midterm fiscal plan.
The latest data on the course of Greece’s gross domestic product concerning the second quarter of the year had generated optimism among ministry officials that the contraction would amount to no more than 3.8 percent at the end of the year. However the arrival of the representatives of the European Commission, the European Central Bank and the International Monetary Fund – known as the troika – led to a detailed revision that has reset the forecast for 4 percent.
Sources said the troika would not accept the 3.8 percent estimate as it wanted to put out the message that there can be no relaxing of the program following the recent good news. Ministry officials qualified the estimate as very conservative, but added that a positive surprise would be better than a negative one at the end of the year.
No definitive agreement has been reached on the course of the economy for 2014, but Greek officials noted that an agreement on a 0.6 percent GDP rebound next year is likely. That had also been the original estimate by the troika for 2014.
The forecast for a 4 percent contraction for 2013 means two things: first, that all those who had expected a far worse recession, including the Organization for Economic Cooperation and Development, will be proven wrong, and, second, that the focus should not be on the improved performance of Greek economy but on the implementation of the streamlining program. By setting the target at 4 percent and not 3.8 percent, the troika wished to cast aside all talk regarding the creation of a primary surplus that would be used for social benefits. Athens and its creditors are yet to agree on the level of the primary surplus anticipated for this year.
If the estimate for a 0.6 percent rebound next year is reiterated, it will also mean that the troika will continue to apply pressure for new measures within 2014, which Athens vehemently rejects.