BoG asks for fiscal forecast revision, to incorporate Brexit effect

The Bank of Greece is calling for a revision of the macroeconomic forecasts on Greece, noting that the ones on which the 2016 state budget and the recently adjusted bailout agreement were based did not take into account the UK’s exit from the European Union and its impact on the Greek economy.

In its report on the course of the country’s credit system, the central bank noted on Tuesday that the possibility of participation of Greek state bonds in the European Central Bank’s quantitative easing program, combined with the restoration of cheap liquidity from Frankfurt, will have a significant positive impact on the results of Greek banks, amounting to some 400-500 million euros in total.

“However, the bigger easing of pressure on banks’ liquidity and the cost of funding will also depend on the implementation of the macroeconomic forecasts on Greece that have not factored in the financial effects of a UK exit from the EU,” the BoG noted, asking for a downward revision of the forecasts.

The central bank also warned that deposits will not return to the local system as long as capital controls are not fully lifted. However, it added, the relaxation of restrictions will have to be a gradual process.