In its latest Fiscal Monitor , IMF notes that “the situation in Greece remains fluid stressing that macroeconomic deterioration and uneven reform implementation have weighed on revenues this year, while financing constraints are leading to under-execution of budgeted expenditures“. Furthermore, “absent further policy changes, the primary deficit would trend towards 1.5-2% of GDP, versus the 1% foreseen at the time of the Extended Fund Facility“, implying a primary fiscal gap up to €2bn.

IMF surprisingly lowered its forecast for general government deficit (as % of GDP) by 0.2pp to 7.0% in 2012 (from 7.2% previously) and by 1.9pp to 2.7% in 2013 (from 4.6% previously). Furthermore, general government gross debt (as % of GDP) is seen at 162.6% in 2012 and at 171.0% in 2013, 9.4pp and 10.1pp higher than its previous forecast on April. IMF also noted that its projections on Greek deficit and debt will be revised.

It is obvious that IMF gg deficit forecast for 2013 of 2.7%, i.e. below the 3% threshold and in line with the eurozone average, is completely unrealistic, while the increase of its gg debt projections by c10pp since April is also not justified. Nevertheless, its general comment on Greek economy is balanced and perfectly describes current situation.