IMF for Greece: Return to primary surpluses from 2023

By Tasos Dasopoulos

The IMF forecasts a primary surplus of 1.1% of GDP for 2023, which will increase to 2% of GDP in 2027, and a significant de-escalation of debt, for Greece, in its report on the fiscal outlook of its member states ( Fiscal Monitor).

In its forecasts, the Fund sees the primary deficit for 2021 (which will be announced on Friday by Eurostat) be finalized at 5.9% of GDP, significantly lower than the 7% of GDP projected in the budget. For 2023, the Fund confirms the transition of the economy to a primary surplus, which next year is expected to reach 1.1% of GDP with the prospect of growing to 1.5% of GDP in 2024, to 1.8% of GDP in 2025, at 1.9% of GDP in 2026 and at 2% of GDP in 2027.

In terms of the budget deficit, the IMF predicts a large reduction but without balanced budgets until 2027. Specifically, the budget deficit is projected to increase this year due to measures to support the economy, in the face of high inflation from fuel and food reaching the 4.8% of GDP from 4% forecast by inflation. In 2023, however, the deficit will begin to de-escalate rapidly, reaching 1.8% of GDP by the end of next year, 1.3% of GDP in 2024, 1.1% of GDP in 2025 and 2026 and at 0.9% of GDP in 2027.

Big debt reduction

In terms of critical debt size, the IMF is also anticipating significant de-escalation, although it uses a different method from that of General Government debt. Specifically, the Fund calculates as “gross” debt what is served today, but summing up the interest arrears of loans from the European Stability Mechanism (110 billion euros) and the last ESM loan from the third memorandum (67 billion euros) which are in a period of grace, as if they were being served normally.

Under this condition, the debt, according to the IMF, from 198.9% of GDP in 2021, is expected to decrease this year to 185.4% of GDP and then to 178.7% of GDP in 2023, to 172, 6% in 2024, 168.2% in 2025, 165.1% of GDP in 2026 and 160.7% in 2027. In other words, in six years we will have a debt reduction of 38.2% of GDP .

Admits steady growth

In its forecasts for the course of public revenues and mainly expenditures, estimating that they will gradually reduce their share in GDP, the Fund confirms that in the coming years the sign of growth will be positive.

In particular, the Fund predicts that public revenues will reach 48.3% of GDP despite the crisis and tax cuts launched from 49.1% of GDP in 2021. An explanation given for the good course of revenue not only for Greece but also for all developed economies is the fastest rate of savings of businesses and households due to the pandemic. In 2023, when the Government’s tax reduction agenda is expected to return, while there will be continuity in growth, revenues as a percentage of GDP will decrease to 47.6% of GDP. In the coming years, revenues will continue to decline, reaching 47.4% of GDP in 2024, 46.8% in 2025, 45.9% of GDP in 2026 and 44.8% of GDP in 2027.

The continuation of the positive growth is shown by the IMF forecasts for the course of expenditures. In particular, expenditures are expected to reach 53.1% of GDP this year, including measures to support accuracy, to be reduced to 49.4% of GDP in 2023, to 48.8% in 2024, to 47.9 % of GDP in 2025, 46.9% in 2026 and 45.7% of GDP in 2027.