November 21, 2017 / 5:06 PM / a year ago

Greece sees primary surplus at 3.82 percent, GDP growth 2.5 percent in 2018 budget

ATHENS (Reuters) - Greece said on Tuesday it would post a better-than-targeted primary surplus of 3.82 percent of gross domestic product in 2018 and build on this year’s economic upturn.

FILE PHOTO: Paper receipts from withdrawals are seen in a litter box at an Eurobank ATM that was emptied by people withdrawing cash, in Athens, Greece, June 27, 2015. REUTERS/Yannis Behrakis/File Photo

The final draft of the state 2018 budget submitted to parliament on Tuesday forecast an expansion in output of 2.5 percent next year, compared to a projected 1.6 percent in 2017.

Greece’s international lenders have set a lower target of 3.5 percent for next year’s primary surplus, which excludes debt servicing costs.

But the government expects the country’s overall debt pile to continue growing.

It sees public debt rising to around 179.8 percent of output next year from 178.2 percent this year. Greece, which has received three international bailouts since 2010 to stave off bankruptcy, is the most indebted state in the euro zone.

The third bailout expires in August 2018, at which time Greece will be expected to finance itself from markets rather than rely on creditor handouts.

Greece has made one foray onto markets this year, and last week announced a swap of some 20 small bond issues for five bigger ones. The budget draft refers to plans for new market issues, but is not specific on timing or size.

The budget, Finance Minister Euclid Tsakalotos said, “marked the country’s exit from a long period of macroeconomic adjustment programmes’.

Parliament was set to put the draft to vote in a debate scheduled to start on Dec. 18 and end on Dec. 22.

Greece is gradually returning to growth on the back of a resurgence in demand after a crippling recession that knocked a quarter off output between 2008 and 2016. Under the country’s third bailout programme, it was targeted to return a small primary surplus from 2016 onwards.

It has exceeded those targets, giving Greek authorities some leeway in offering benefits and supporting sections of the population particularly worn down by pension cuts and heavy taxes.

Parliament approved a 1.4 billion euro ‘social dividend’ that will be distributed to vulnerable groups this year, the result of the 2017 primary surplus authorities estimated at 2.44 percent of GDP.

“A significant overshooting of the targets... has contributed to a restoration of credibility of Greek public finances and created the preconditions on the country returning to international markets in a sustainable manner,” Tsakalotos wrote.

However, the overhang has prompted criticism from opposition parties, which say it offers a clear indication that the tax burden on the population is far too high.

“Everything, particularly the middle class, was bled dry so this so called ‘merciful’ government could play the benefactor,” Opposition New Democracy leader Kyriakos Mitsotakis said during a parliamentary debate late Monday.

“That’s how you got the surplus, by pretending to be the Santa Claus of politics in a country where many of our compatriots have forgotten Christmas.”

Reporting By Athens newsroom; editing by John Stonestreet

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