Government Policy to Overshoot Primary Budget Surpluses

The Greek government expects to overshoot its budget surplus targets for a third consecutive year in 2018, a senior government official said on Monday, an outcome that could help ease the austerity burden imposed on a recession-weary population.

In a final budget draft due to be submitted to parliament on Tuesday, Greek authorities will outline projections of a primary surplus – the fiscal surplus excluding debt repayments – of between 2.4 and 2.5% this year, and of more than 3.7% next year, the official told Reuters.

The figures mark an upward revision. A draft budget submitted on Oct. 2 had put the surplus at 2.2 percent for 2017 and 3.57 for 2018.

A strong fiscal surplus could allow the government – facing public fatigue with pension cuts and tax hikes – to redirect funds to vulnerable sections of the population hit hardest.

“It makes more room for targeted social and tax policy interventions,” said Nikos Magginas, an economist at National Bank.

Authorities are now also expecting a 1.6% expansion in output this year, down from a previous forecast of 1.8%, said the official, speaking on condition of anonymity.

The Greek economy is expected to expand by 2.5% in 2018, the official added, up from a 2.4% forecast. The revision, the official said, was “in line with European Commission expectations”.

Source: Reuters