IMF expects smaller contraction

The Greek economy will post a smaller-than-expected contraction this year and revert to growth in 2014, an International Monetary Fund report showed on Tuesday.

The forecasts issued by the Washington-based Fund for the global economy include an estimate for a 4.2 percent decline in the country’s gross domestic product, compared with a budget target of a 4.5 percent contraction, while in 2014 the economy is seen expanding by 0.6 percent. Growth will continue in the following years, climbing to 3.3 percent in 2018, says the IMF, one of Greece’s main creditors.

The Greek fiscal deficit will come to 4.6 percent this year (compared to a 4.7 percent estimate the IMF had made in October) and drop to 3.4 percent in 2014.

For the whole of 2013 the economy will show a cyclically adjusted surplus (which factors in the economic effects of the recession) of 0.2 percent, growing to 0.8 percent next year. These forecasts are revised upward by 1.3 percent and 1.1 percent respectively compared with the previous IMF report.

The Fund adds that the continuing adjustment of the economy and the revised reform agenda that places an emphasis on the administration of public revenues and controlled expenditure will bring the primary deficit of the budget (not including interest payments) to zero in 2013. This will be followed by a primary surplus of 1.5 percent in 2014, which will rise to 3 percent in 2015 and 4.5 percent in the following three years, according to the IMF.

The country’s funding requirements have dropped considerably, the report suggests, following the debt buyback and the concessions from its European peers, especially as far as the extension of the loans is concerned.

The Greek debt is seen reaching 179.5 percent of GDP this year before dropping to 175.6 percent in 2014. Both rates are 2.4 percent smaller than the previous forecast in October. In 2018 the debt will stand at 144.3 percent.

The report was released a day after the Fund’s top representative in Athens, Poul Thomsen, expressed optimism about the course of the country’s streamlining process during a speech at an Economist conference in the Greek capital.

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