IMF Review Foresees Lower Primary Surplus for Greece in 2017 & 2018

More bad news for the government: In its biannual report on the world economy, the IMF reiterates its view that the Greek economy will have lower primary fiscal surplus than the agreed upon target, for both this and next year.

The Fund claims that the country’s primary surplus will be 2.5 billion euros lower than the target set by the programme for 2017 and 2018. This opens the road for potentially more fiscal measures in the third bailout negotiations starting in October.

According to the data released by the IMF in its report, Greece will have a primary surplus of 1.7% of GDP in 2017 (0.05% below target) and 2.2% in 2018 (a substantial 1.3% below target).

Concerning the 2019 primary fiscal surplus, the IMF concurs with the 3.5% target set by the programme, but under two significant conditions: That there will be pension cuts and that the taxation limit for wages and pensions will be significantly lower.

While pension cuts have been agreed upon by the Greek government and its European lenders, lowering the taxation limit appears to be out of the question for the moment, with both the Eurogroup and the German government being dead against the idea.

In the Greek debt front, the report says that the debt / GDP ratio will be 18 percentage points lower in five years, with the Greek debt dropping to 161.2% of GDP by 2022.

Whether or not the IMF will be asking for extra fiscal reduction measures for 2018 will be debated in its annual meeting in late October, where the Greek programme will be on the agenda.