Budget Office: Greek economy has positive outlook, still faces long-term challenges

The Greek economy has positive prospects but also faces long-term challenges, the Parliament’s State Budget Office said in its quarterly report on the Greek economy, the first under its new composition and Frangiskos Koutentakis as coordinator.

The report said the Greek economy has favourable prospects following a positive growth rate recorded in 2017 and forecasts of an accelerated growth rate this year, of around 2.0 pct. The report also recorded positive developments in the Greek economic course. It pointed out however that challenges remained, such as a new monitoring framework currently under negotiations between the Greek government and its creditors, the country’s high public debt, non-performing loans, tax arrears to the state totaling 130 billion euros, a continuing outflow of specialized human resources to countries abroad, and long-term unemployment.

Dealing with these challenges requires a long-term strategy with a minimum consensus among political parties and social agencies, Budget Office sources said, adding that an open dialogue on how to deal with these challenges was also necessary. The same sources said that this discussion must focus on the following: ensuring fiscal stability, safeguarding high and stable primary surpluses, exploiting fiscal space, strengthening social protection, supporting high added value export sectors, supporting domestic investments and attracting foreign investment, and standardizing settlement procedures for private sector arrears that include social protection.

The report noted that fiscal data from the first quarter showed it was fully feasible to achieve fiscal goals set by the adjustment programme for 2018, and stressed that a precondition to achieve these favourable goals was completion of a fourth review of the current bailout programme. Completion of the programme and the termination of funding from the official sector will lead to the determination of a new monitoring framework through negotiations with creditors in the next few months.

Official creditors will have to present an efficient system of incentives to ensure the responsible position of future governments in the country, using a debt relief package on conditions to be assessed in the long-term.

The Parliament’s State Budget Office underlined that economic policy in the future must deal with the problematic stocks created by the long-term economic crisis on the balances of the Greek economy, each of which -public sector, banks, enterprises and households – faces its own open challenges and obligations.

Dealing with these challenges will need time, well-designed interventions and improving a regulatory framework in the economy, but mainly it would need a long-term strategic plan exceeding the term of one government. Therefore, its basic elements should be put on public consultation to ensure a minimum consensus, the report noted.