ANA-MPA: Greece to present very high primary surpluses in 2018-2021 period

A Medium-term Framework program tabled to Parliament on Saturday, along with an omnibus bill, envisages very high primary budget surpluses until the end of 2021. The country’s primary surplus (based on ESA) is projected to reach 2.1 pct of GDP (3.817 billion euros) this year, rising to 3.9 pct (7.415 billion) in 2018, 4.4 pct (8.522 billion) in 2019, 4.8 pct (9.675 billion) in 2020 and 5.6 pct (11.825 billion) in 2021.

The ESA projection is very different from that of the program, but still show an overshooting of the goal for a primary surplus of 3.5 pct of GDP. The Medium-term program (based on the methodology of the program) envisages a primary surplus of 1.8 pct of GDP in 2017 and primary surpluses of around 4.0 pct of GDP by and 2021.

The Medium-term Framework program lowers a projection on the country’s growth to 1.8 pct this year, from 2.7 pct initially and a 2.1 pct estimate of the European Commission. In 2018, the GDP is projected to grow by 2.4 (2.5 pct by the Commisison), in 2019 the economy is projected to grow by 2.6 pct, in 2020 by 2.3 pct and in 2021 by 2.2 pct. GDP growth will basically reflect higher private investments (up 5.9 pct this year, 10.8 pct in 2018, 12.1 pct in 2019, 9.6 pct in 2020 and 7.7 pct in 2021), while private consumption will rise by 1.3 pct this year, 1.4 pct in 2018, 1.3 pct in 2019, 1.2 pct in 2020 and 1.2 pct in 2021. Public investments are projected to rise by 0.32 pct on average in the period 2017-2021.

Greek exports are projected to rise by 3.3 pct this year, 4.0 pct in 2018, 4.4 pct in 2019, 3.2 pct in 2020 and 3.0 pct in 20121, while imports are projected to rise by 2.8 pct this year, 3.5 pct in 2018, 4.3 pct in 2019, 3.1 pct in 2020 and 2.9 pct in 2021. The inflation rate is expected to rise by 1.2 pct this year, 1.1 pct in 2018, 1.3 pct in 2019, 1.6 pct in 2020 and 1.8 pct in 2021, while the unemployment rate is projected to fall to 19.8 pct of the workforce in 2018, 18.3 pct in 2019, 17.1 pct in 2020 and 16.3 pct in 2021.

The country’s GDP is projected to rise from 181.204 billion euros in 2017 to 211.208 billion in 2021, while the country’s public debt is expected to ease from 319.7 billion euros (176.4 pct of GDP) in 2017 to 316 billion (149.6 billion of GDP) in 2021.

The privatization program is expected to raise 4.564 billion euros in revenue in the 2017-2021 period, of which 2.153 billion this year, 2.073 billion in 2018, 143 million in 2019, 109 million in 2020 and 86 million in 2021. A package of reform measures in the pension system is expected to raise 2.63 billion euros in 2019, while changes in the tax system will raise tax revenue by 1.92 billion euros in 2020. State revenue are projected to rise from 55 billion euros in the 2017-2019 period to 56.8 billion in 2020.

The omnibus bill envisages that the state’s participation in several state enterprises will be transferred to a new privatization fund, including Athens Public Transport Organization (OASA), OSE, the Olympic Games stadium, Hellenic Post, the 25 pct of an equity stake in the Athens International Airport, Hellenic Salt, ETBA – Industrial Regions, Korinth Canal SA, PPC, Helexpo, Duty Free Shops, Athens Water and Thessaloniki Water, Hellenic Vehicle Industry, Attico Metro. The bill does not envisage the sale of PPC’s lignite units but the sale of a 66 pct of DESFA by the end of 2017.

Under the omnibus bill tabled to Parliament the tax-free income ceiling will be set to 5,700-6,600 (depending on the number of children) from January 1, 2020, while if the IMF in cooperation with the European Commission, the EMS and the Greek authorities agreed that a forward-move of introducing this measure to achieve a 3.5 pct primary surplus in 2019 was necessary, this move could be introduced for incomes obtained from January 1, 2019.

The omnibus bill also envisages a series of balancing measures of lowering taxes on income, real estate and enterprises obtained from 2020 on the condition that the government achieved its primary surplus goals.

The bill also offers legal protection to civil servants and bank officials approving debt restructuring for enterprises, a move necessary to implement an out-of-court compromise agreement on corporate arrears.