IMF still likely to exert pressure for stricter fiscal policy

The International Monetary Fund on Wednesday upwardly revised its Greek fiscal projections for 2017 and 2018, but maintained its distance – of 0.6 percent of gross domestic product – from the forecast of the European Commission for a primary surplus of 3.5 percent of GDP this year.

This leaves open the question of whether it will press for additional fiscal measures – particularly bringing forward the reduction of the tax discount to January 2019. A Fund spokesman said a decision on that will be made in June.

The IMF raised its estimate for the 2017 primary budget surplus to 3.7 percent of GDP from just 1.7 percent forecast six months ago. For this year, the IMF is anticipating a primary surplus of 2.9 percent, compared with a 2.2 percent forecast in the previous report. On Monday the Fund lowered its own estimate on Greece’s growth from 1.8 percent to 1.4 percent in 2017 and from 2.6 percent to 2 percent for 2018.

IMF officials point out that the higher primary surplus is the flip side of the lower growth projection reflected in the Fund’s World Economic Outlook a day earlier. An IMF representative told Kathimerini that “the two are fully interrelated. The achievement of higher primary surpluses has come through the shrinking of expenditure,” stressing that this concerned state expenditure, as private spending posted a marginal increase last year. Greece did not even benefit from the dynamic growth of the eurozone, which is continuing in spite of increased risks to the global economy due to the threat of a trade war.

From 2019 to 2022 the IMF concurs with the targets of the European program, anticipating a primary surplus of 3.5 percent of GDP, before a decline to 1.5 percent of GDP from 2023.

Analysts reckon that the relative convergence of the IMF estimates on the Greek primary surplus with those of the European Commission could contribute toward bringing the Fund closer to Brussels on the issue of the sustainability of the Greek debt. It will certainly ease discussions at the meeting of the Washington Group which is scheduled to take place on Friday.