IMF latest forecasts and statement on Greek economy

In its latest edition of World Economic Outlook and Fiscal Monitor, IMF sees Greek GDP contracting 6.0% in 2012 and 4.0% in 2013, while unemployment rate is expected to substantially rise from 17.3% in 2011 to 23.8% in 2012 and to 25.4% in 2013. It is reminded that, according to the latest Greek government forecasts, incorporated in the 2013 draft budget tabled to parliament on October 1, recession is estimated at 6.5% in 2012 and 3.8% in 2013, while unemployment rate is forecasted at lower compared to IMF levels, at 23.5% in 2012 and 24.7% in 2013.

C/A deficit (as % of GDP) is anticipated to ease from 9.8% in 2011 to 5.8% in 2012 and 2.9% in 2013, while inflation is projected to slip from 3.3% in 2011 to 0.9% in 2012, turning to negative grounds (-1.1%) in 2013.

General government deficit (as % of GDP) is projected to ease from 9.1% in 2011 to 7.5% in 2012 and 4.7% in 2013, 0.3pp and 0.1pp respectively better than April forecasts. IMF long-term forecasts call for a deficit of 3.4% in 2014, 2.5% in 2014 and 1.4% in 2016 and 2017. Furthermore, primary deficit (as % of GDP) is anticipated at 1.7% in 2012, turning to zero in 2013 and then to surplus of 1.5% in 2014, 3.0% in 2015, 4.5% in 2016 and 4.7% in 2017.

On the contrary, IMF forecasts general government debt (as % of GDP) to rise from 165.4% in 2011 to 170.7% in 2012 and 181.8% in 2013, implying an increase of 17.5pp and 20.9pp respectively compared to April forecasts. Following a peak in 2013, debt is seen easing to 180.2% in 2014, 174.0% in 2015, 164.1% in 2016 and 152.8% in 2017. It is also noteworthy that gross financing needs, i.e. maturing debt and budget deficit, are expected at 28.9% of GDP in 2012 slipping to 17.6% in 2013 and 17.4% in 2014.

IMF also sees general government revenues (as % of GDP) to increase from 40.9% in 2011 to 43.5% in 2012, peaking to 44.9% in 2013, easing thereafter to 41.4% by 2017. The adjustment in general government expenditure relative to GDP is more pronounced with the respective ratio expected to materially drop from 51.0% in 2012 to 47.8% in 2014 and 42.8% in 2017.

During the press conference after the Eurogroup meeting held in Luxemburg on October 8, IMF Managing Director Christine Lagarde stated that: “On Greece, clearly there is progress on the ground. More needs to be done on all fronts – fiscal, structural reforms, financing, debt – clearly we will be working on that. The mission that is working as part of the troika is not going to Tokyo (for the IMF annual meeting). They will be stationed in Athens to do the work that needs to be done as this is very critical for the negotiations”.

Asked to comment on a potential divergence between IMF mission in Greece and IMF official stance, she stressed that “there is no inconsistency between what the IMF mission does on the ground and what I said in front of you; discussions on that kind of situations are always tough and difficult” adding that “Greece is doing a lot, there is no question about it, but list of prior actions need to be implemented”.

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