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MF to discuss Article 4 report on Greece and debt sustainability

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IMF’s Executive Board meeting today to discuss Article IV report on Greece as well as the updated Debt Sustainability Analysis; reportedly, these reports should set out the conditions under which the IMF could participate in the current Greek programme but no final decision on the IMF’s participation/role in the Greek programme should be expected today.


According to press reports, IMF’s report on the progress of the Greek economy in 2016 will say that Greek GDP grew by 0.4% y-o-y in 2016e (above the government’s and the EU forecast). For 2017e, the IMF sees 2.7% y-o-y growth under the condition that Greece will implement all bailout programme prerequisites and join the ECB’s QE that will quickly eliminate capital controls (the IMF team proposes keeping them for another year), and that repayments of overdue public debts to the private sector will accelerate.

From 2018e onwards, the IMF’s forecasts are less optimistic than those of the EC and Greece.
 
On the fiscal front, IMF expects a 1% primary surplus in 2016e (i.e. below the government’s recent estimate of c2%), while in 2017e the IMF predicts that Greece will have to apply the contingency fiscal mechanism because it will not be able to reach the 1.75% primary surplus target.

Specifically IMF’s report estimates that the 2017e primary surplus will be 1%, with the automatic spending cut mechanism likely applying in 2018 as well, since the estimate is that Greece will reach a 1.5% primary surplus, well below the MoU target of 3.5%.

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