EC slashes 2015 growth estimate for Greece

Uncertainty regarding the policies that Alexis Tsipras’s government will follow has taken a toll on confidence in the Greek economy and could slow the country’s recovery, the European Commission warned in its winter forecasts, as it proceeded to a downward revision of its estimate for growth this year.

The forecasts published on Thursday point to an economic growth rate of 2.5 percent for Greece in 2015, down from a previous estimate of 2.9 percent, which was also the forecast of the Finance Ministry. This is despite the fact that the economy grew even more than expected last year, up 1 percent against an estimate for 0.6 percent.

It is clear that Brussels attributes great significance to the uncertainty regarding the choices of the new Greek administration, but its forecasts are based on the assumption that Athens will meet the pledges of the previous government in the context of the existing bailout program.

For the first quarter of the year the Commission expects uncertainty to be reflected in economic activity, but for the year as a whole it anticipates stronger private consumption, an increase in exports and a rise in investments, but only provided that “the political environment stabilizes.”

Brussels calculated that the primary budget surplus last year amounted to 1.7 percent of GDP and will climb to 4.8 percent this year, against a previous estimate of 4.1 percent of GDP. However this will require new measures in addition to what the budget has provided for, the report stressed.

It added that the risks to the achievement of fiscal targets derive from the temporary reduction in tax revenues, reflecting the uncertainty concerning what kind of tax measures the new government will introduce.