The fiscal target for 2011 will be missed again. This is mainly attributed to revenue fatigue associated with a deeper recession, an unstable tax environment and considerable income losses. Primary current spending of the government has again proven its lack of responsiveness to policy intentions.
While there have been deficiencies in the implementation of fiscal measures, the Government has made important progress in consolidation efforts. In June, Greece adopted the medium-term fiscal strategy (MTFS), specifying a set of consolidation and fiscal structural reform measures through to 2015. For 2011, the MTFS provided for fiscal consolidation measures quantified – at that time – at 3 per cent of GDP, and above 10 per cent for the period through 2014. Most measures provided for in the MTFS for 2011 have been duly legislated and are being implemented. However, in a number of cases the quantification of the measures had to be revised downwards because of implementation delays or changes to their design that reduce their impact; in a few instances, the agreed measures were not implemented. Nevertheless, the deeper-than-expected contraction in economic activity, taxpayers' liquidity constraints, as well as other fiscal slippages (e.g. in the fight against tax evasion) have also contributed to the reopening of a gap vis-à-vis the previously agreed annual fiscal targets. The Government has prepared an additional package of expenditure and revenue measures to minimise the fiscal slippage for 2011 and to meet the fiscal targets for 2012-14. It is no longer viable to close the fiscal gap for 2011.
The risks to this baseline scenario are broadly balanced. On the positive side, the contribution of net exports to GDP growth may turn out to be stronger than projected in case the impact of ongoing and planned structural reforms arrives more swiftly and external demand recovers faster. In particular, the rapid implementation of measures aimed at enhancing investment opportunities and attract FDI may speed up the recovery. On the negative side, given the uncertainty about the turning point of the business cycle, it cannot currently be excluded that the economy may take longer than expected to return to positive territory. This risk is also reinforced by the projected global economic slowdown.
Full forecast (Greece)
© European Commission
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article