Greece will achieve a primary surplus of 3.5 pct of gross domestic product this year based on general government fiscal data for the first quarter of 2019, but it will be unable to exceed this target if current trends prevail over the rest of the year, Bank of Greece Governor Yannis Stournaras told the Athens-Macedonian News Agency (ANA-MPA) on Wednesday.
“The first-quarter figures reported by the General Accounting Office, which almost coincide with figures released by the Bank of Greece, showed that the state budget will not record a primary surplus in excess of the 3.5 percent target for the year,” Stournaras told the ANA-MPA.
“This means that if the prevailing trend cannot be reversed for this year, there will be not be fiscal space for additional benefits beyond those included in the 2019 state budget,” he added.
His comments come a week after Prime Minister Alexis Tsipras announced a package of handouts that include value-added tax reductions, a one-off bonus for pensioners and a reduction of the primary surplus target of 3.5 percent of GDP for the period from 2020 to 2022 to 2.5 percent.
“I have strongly supported the need to lower the primary surplus target to 2.5 percent of GDP in order to boost the recovery of the Greek economy. However, any change in agreed goals should be made in agreement with the institutions,” Stournaras warned, echoing reservations expressed by Greece's creditors.
The central banker warned that recent jitters in the Greek bond market also reflect investors' concern over these recent developments.
“Missing the target for a 3.5 percent primary surplus could lead to the imposition of new measures, such as spending cuts and reducing the Public Investment Program, which could have a negative impact on economic growth,” Stournaras said.
He added that central bank estimates see the country's GDP growing by 1.9 percent this year, below the 2.3 percent estimated by the Finance Ministry.
“There is no reason, for the time being, to revise this forecast,” Stournaras told the ANA-MPA.