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Govt forecasts 0,7% deficit for 2015

26/08/2015 08:50
A better than expected performance of the economy during the first half of the year prompted the Ministry of Finance to positively revise its forecasts for the whole year expecting a 0,7% fiscal deficit.

In the ministry's six-month fiscal policy report the revised figures show that a fiscal deficit of €130 mn is forecast as opposed to €757 mn or 4,8% previously expected.

The much improved deficit by a total of €627 mn, is due to both higher budgeted revenues (€276 mn more) and to lower expected expenditures (by €351 mn).

The higher revenues are basically due to improved taxes on production and from imports as the economy is expected to pick up pace and grow by 1% compared to 0,4% previously expected and to 0,5% as stated in the latest seventh review of the economic adjustment program.

The still high non-performing loans in the banks' balance sheets, the probable heightened sanctions against Russia and the situation in Greece are mentioned as factors that can derail the economy's recovery.

Increased economic activity is projected to have a positive impact on the rate of unemployment which has been revised downwards to 16% from 17%.

The inflation rate has been revised to -1,4% from 1,1% before as oil prices continue to decline suggesting that low levels are here to stay for the whole year.

At the same time an improved performance is forecast in most of the expenses categories, including salaries, the combined effect of which stands at €351 mn.

Interest expenses are revised from €547 mn to €464 mn leading to a primary fiscal surplus of €334 mn compared to a deficit of €211 mn before, a €545 mn improvement.

These will have a positive effect on the government debt which is expected to be limited to 105% of GDP (€18,5 bn vs € 17,6 bn of GDP) from 108,4% before.

The ministry notes that the revised 2015 figures may be adversely affected by the recently announced measures aiming to revive the property industry, as well as by the new legislation concerning the minimum guaranteed income.

For 2014 the budgeted fiscal deficit was €708 mn, 4% of GDP but the much better than expected performance of the economy resulted in an actual deficit of €44 mn just 0,2% of GDP.