The Finance Ministry is planning to table a first budget draft for 2016 next Monday that will be based on a better-than-anticipated picture for the course of the economy this and next year, thereby allowing for fewer fiscal measures. This week will also see the drafting of the list of prior actions that the government must fulfill by early November in order for 3 billion euros of bailout loans to be disbursed.
According to sources, the Finance Ministry estimates that the target for an economic contraction of 2.3 percent of gross domestic product this year was particularly pessimistic given the figures at hand for the first half of the year when the economy expanded 0.5 percent. Athens is now anticipating the contraction to amount to 1.5 percent for 2015.
It is in fact hard to make any forecasts for the course of GDP this year due to the capital controls. However, the government will draft the new budget on more optimistic targets, in a bid to avoid having to take any fresh measures to meet the targets of a primary deficit of 0.25 percent of GDP for 2015 and a primary surplus of 0.5 percent for 2016. Any extra benefits could be used as offsetting measures to avoid the imposition of other interventions, such as a value-added tax on private education.
Athens also wishes to use this optimistic forecast as the baseline scenario for the recapitalization of banks.
There is optimism among creditors that the government will have the first program review completed by the end of the year, mainly due to the fact that there are not many alternative options left. A European official told Kathimerini that the program is deliberately front-loaded: “It is exactly because after 2015 the country’s funding needs are very small, that the program has been designed this way, so as to have pressure,” he said.
Kathimerini understands that the Euro Working Group will hold a teleconference this week to establish the list of prior actions needed in two stages by early November for the payment to Athens of the two tranches adding up to 3 billion euros.