Greece’s Long-Term Outlook Not Good

While Greece is seemingly on the road to recovery, its economic outlook over the next decade has deteriorated, the European Commission said in a report on April 25.

Greek debt, now at 175 percent of Gross Domestic Product (GDP) will still be about 125 percent in 2020 and 112 percent the Commission said, worse than the previous estimates of 124 percent for 2020 and to be “substantially below” 110 percent in 2022.

“This deterioration is due to several factors: a lower forecast for nominal GDP, mainly reflecting a deeper adjustment in prices, a somewhat lower forecast for privatization revenue following delays in privatizing government assets and higher arrears clearance compared to the previous revue,” the report said, the news agency Reuters reported. 

Greece’s faltering privatization program, which has drawn almost no interest from prospective investors, had had its target revenues through 2020 lowered to 22.3 billion euros, compared to the original 50 billion euros.

Despite the fact that Greece returned to bond markets earlier this month, it still relies on a pledge by euro zone countries to provide it with further help, to be considered fully funded, the Commission said.

The country faces a funding gap of 5.5 billion euros ($7.60 billion) through to end-May 2015, according to the report. Also, the Commission’s debt forecasts for 2020 and 2022 are based on the assumption of further debt relief for Athens.

Greece on April 25 made a request to its international lenders to change the terms of the 240 billion euros ($330.7 billion) in two bailouts although it’s not known if that will include a so-called “haircut” in which the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) won’t be repaid in full.

Greece earlier this week qualified for further debt relief from its Eurozone partners after having a primary surplus of 1.5 billion euros certified by the EU’s statistics agency Eurostat.

Greece’s government says it doesn’t need a third bailout.