The International Monetary Fund has published its latest Fiscal Monitor report, according to which the primary deficit in Greece will be much higher than estimated by the Greek government and European Commission.
Contrary to the recent 2016 draft budget and new bailout agreement, which include provision for a 0.24% and 0.25% GDP primary deficit in 2015, the IMF expects the rate to be 0.5%, which will in turn require additional measures worth 450 million euros in 2015 and a further 900 million euros in 2016.
According to the IMF, Greece’s public debt will soar to 206.6% in 2016, contrary to the 200.9% prediction in the bailout agreement. By 2020 the IMF estimates the debt will have dropped to 182.5%, compared to the 174.5 GDP target outlined in the bailout agreement. Furthermore, the IMF predicts a budget gap of 400 million euros in 2017 and 1.8 billion euros in 2018, with Greece set to achieve a 3.5% GDP primary surplus after 2018.
New pension cuts imminent?
Despite being the “champion” of pension reforms, the IMF predicts new pension cuts in its report. According to the Fiscal Monitor, Greece is the only country where the age of retirement increased in 2011-2014 and introduced stricter rules for early retirement.
Greek authorities will likely have to carry out additional pension cuts to offset the additional expenses cuts for pensions and healthcare included in the recent bailout agreement.
The October 2015 edition of the Fiscal Monitor is available online.
