2016 to witness peak of Greek external debt

The current year is expected to witnessed the peak ratio between public debt and Greek GDP, with the figure estimated to reach 182 to 183 percent of GDP.  

Nevertheless, the leftist government in Athens and European creditors predict that 2017 will mark the beginning of a gradual reduction of the Olympus-sized “mountain of debt”, given that forecasts optimistically calculate GDP growth in Greece at 2.7 percent in 2017.

Such a development would reverse an eight-year recession, as the current year is expected to end with a marginal loss of GDP of 0.3 percent, on an annualized basis.

The optimistic prediction for 2017 is combined with an increasingly ambitious target of a 1.75-percent primary budget surplus target, as a percentage of GDP. This year’s target is a modest 0.5-percent primary budget surplus goal.

Greece’s public debt for the first quarter of 2016 reached 309.2 billion euros in absolute terms, or 176.3 percent of GDP, the worse performance amongst the EU’s 28 member-states.

In terms of the breakdown of the external debt in the first quarter of 2016, 137.9 percent was comprised of loans, the majority of which have been extended by institutional creditors.

Finally, a closely-watched debt sustainability study by the IMF is expected in October 2016, which will essentially mark the next phase in whatever negotiations towards possible debt relief. The date of the study’s release also coincides with what is expected to be a conclusion of negotiations for the second review of the Greek program (third bailout).