Greece will have a budget surplus before interest costs in 2013, a year ahead of schedule, giving Prime Minister Antonis Samaras leverage to prod euro-area creditors for more help in lowering its debt burden.
The primary surplus will rise to 2.8 billion euros ($3.8 billion) in 2014, or 1.6 percent of gross domestic product, after a surplus of 340 million euros this year, according to the 2014 draft budget, Alternate Finance Minister Christos Staikouras told reporters in Athens. The overall deficit will be 2.4 percent of GDP both this year and next, according to the budget, which was submitted to parliament today.
“This budget was drafted in an environment of gradual macroeconomic and fiscal stabilization,” Staikouras said. “It takes into account the first positive signals, seen in 2013, which were the result of Greek society’s great sacrifices.”
Under a 240 billion-euro financial rescue program from the euro area and International Monetary Fund, Greece had to eliminate the primary deficit this year and post a primary surplus of 1.5 percent of GDP in 2014.
Euro-area finance ministers in November said they would “consider further measures and assistance” for Greece to reach a debt-to-GDP ratio of 124 percent of GDP in 2020 once it achieves an annual primary budget surplus. The IMF sees the debt load peaking at 176 percent of GDP this year.
Greece had initially forecast a balanced budget for this year. GDP will expand 0.6 percent next year after shrinking 4 percent in 2013, the sixth straight year of contraction, according to the draft. This compares with the forecast for output to shrink 4.2 percent this year before growing 0.6 percent in 2014 in the IMF’s latest report on Greece in July.
Samaras said on a trip to Washington last week that with Greece on track to achieve the primary surplus, euro-area leaders shouldn’t procrastinate on addressing the country’s debt relief.
General government debt will reach 175 percent of GDP next year, or 319 billion euros, from 321 billion euros this year, according to the draft budget’s forecast.