Economic Analysis, Greece

2006 Outlook – Correction of excessive deficit feasible

Authors: G. Hardouvelis, P. Monokroussos, C. Papadopoulos, I. Lekkos, C. Vorlow
Publication: Greece Macro Monitor, Eurobank Research, February 2006

Key points:

  • ‰In 2006, the economic outlook remains favorable and In 2006, the economic outlook remains favorable and we forecast above 3.0 percent real GDP growth on we forecast above 3.0 percent real GDP growth on recovering investment activity. recovering investment activity.
  • The results of our sensitivity analysis of budgetary The results of our sensitivity analysis of budgetary projections suggest that even under relatively projections suggest that even under relatively conservative assumptions about the macroeconomic conservative assumptions about the macroeconomic environment, a correction of environment, a correction of the excessive deficit is the excessive deficit is feasible this year. feasible this year.
  • It is of paramount importance that authorities meet nce that authorities meet tax collection targets in order to attain the 3.0 tax collection targets in order to attain the 3.0 percent of GDP budget deficit threshold, otherwise percent of GDP budget deficit threshold, otherwise additional spending cuts additional spending cuts will likely be required. will likely be required.
  • The moderation of public wage growth and the The moderation of public wage growth and the government’s increased emphasis on structural government’s increased emphasis on structural reforms leave scope for some easing in inflationary reforms leave scope for some easing in inflationary pressures this year.

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