Govt banks on H2 2016 economic revival after bailout loans disbursed

By Th. Tsiros

Disbursement of a long-expected 7.5-billion-euro loan tranche to Greece is set for Monday, a development punctuated by the arrival in Athens of European Stability Mechanism (ESM) managing director Klaus Regling.

The remaining 2.8 billion euros of a 10.3-billion-euro bailout package (for most of 2016) comes in September under the condition that the leftist Greek government fulfill another 15 prior actions, with the majority concerning reforms in the country’s labor market.

In the meantime, the emphasis now turns to translating the conclusion of the first review of the Greek program (third bailout) into tangible results on the economic front, given that the economy again moved in a recessionary orbit for the first part of the year. The challenge is to post increased GDP growth figures in the second half of the year and overturn the slump in the first quarter, thereby ameliorating the figure for the entire year. The goal is to keep the GDP decrease at a marginal drop, from  -0.3 to -0.7 percent, compared to 2015.

 The memorandum-mandated primary budget surplus target for 2016 is 0.5-percent of GDP.

Guarded optimism on the part of the government that it will meet both goals – a marginal drop in GDP and a primary budget surplus – center mainly on four parameters:

• An expected increase in private sector consumption, despite the fact that H2 2016 will witness a wave of new taxes, including VAT, and reductions in pension rates.
• An increase in exports, following a disastrous first quarter, when the figure was down 11.7 percent, yoy. The balance of trade figure was nevertheless unaffected as imports also fell during the same period by 12.8 percent.
• An increase in the number of tourism arrivals.
• A boost in investment, particularly in the private sector. Two landmark privatizations, i.e. 14 regional airports and the Helleniko real estate redevelopment, are viewed as a fillip by the government to spark a return of investment activity in the Greek economy.