Monday , June 21 2021

Shocked and in awe of the four IMF scenarios for Greece!



The Monetary Fund saw the launch of Greek debt, because of the crisis brought about by the pandemic! Risks jump to a record high of 216% of GDP in 2021 and financing needs to rise to 22.2%

A bell for Greece’s debt and financial needs From Greece “suitable IMF, at that time Dana quietly pushing our country into the limit of ESM prevention credit. In fact, European funds are now gaining supremacy and creating a new mechanism that is the final “bastion” of rescue.

Of course ESM also has a mechanism for Covid, with a variety of loans that can be made available to European countries. However, the terms and conditions turned pale in the face of the Memoranda that passed Greece.

The IMF, however, saw that Greece’s debt skyrocketed, just before our country repaid the IMF. In fact, he asked Greece to finish the repayment procedure early, because, as he stressed, Greece has a large cash “bearing”. It was as if he saw the future development of Greek debt and tried to distance himself from the responsibility of the last decade..

As mentioned in Fund reports, «Greece’s public debt remains viable in the medium term, with the debt vulnerability caused by the pandemic greatly reduced by Greece’s sizeable cash reserves and a European Recovery Fund fund, which will contribute to adequate capacity. debt payments».

The new pandemic data has not made the IMF change its forecasts and forecasts for debt sustainability, known as DSA. However, he announced beforehand sustainability review in the first half of 2021.

The IMF described it Greek economic risk with a number scenario and shock, guided by its evolution pandemic.

Approx

  1. Basic surprise. A lower primary yield of 2% of GDP (on average) in 2021-2022 will increase debt to GDP by about 6.5% by 2023. The country’s cash needs will increase by an average of 1.5% over the 2020- 2029 (the period in which the debt is sustainable). However, this means that the need for financing will be above the 15% limit.
  2. A real surprise. A decrease in growth of 4% in 2021. This will bring an increase in new debt in 2023 well above the base scenario. In this case the need for financing will increase by 3.5% of GDP. And in this scenario it will be above the 15% limit in the period 2021-2022.
  3. Continuous shock. This is the biggest risk to the Greek economy, according to the IMF. If real interest rates increase by 400 basis points in one year between 2021-29, debt will increase by 7% by the end of this decade. The cost of state financing will be higher and the requirement is 1% higher.
  4. All surprises together. The IMF made another scenario. Let all the previous shocks come at once. This means that debt will remain above 200% of GDP until 2024. Such developments will breach the medium-term limit of 15% by 2021-2022 and will reach nearly 20% by the end of 10 years.

Scenarios for 2021

Against the backdrop of the new Budget, the IMF is projecting its own negative scenario based on the effects of the pandemic. Under this scenario, prolonged action for Covid-19 will bring slower-than-expected growth by the government, as markets will not function and new state-sponsored support measures will be required.

In such a scenario, debt will increase to 216% of GDP by 2021 and will remain above 200% of GDP through 2026, before gradually starting to decline. So financial needs can increase 22.2% in 2021, well above the long-term annual limit of 15%.

All of this can be offset by European funding through it Recovery Fund, which, however, are not included – currently – in the IMF baseline scenario.

A very important factor is the recovery of tourism

The IMF counts one economic dive in 2020 and then gradual recovery, which is linked:

  • in investments related to privatization
  • in the first installment of a grant from the EU recovery program
  • for the highest export of goods
  • in increasing private consumption.

However, a critical factor – apart from vaccines – is tourism. If 2021 does not recover significantly, it will cause new “headaches” in the state treasury.

The Greek economy is based on “heavy industry”, which is contributes to GDP with revenues of 18 billion euros per year. To 2021 probably is Factor number 1 for the return of the country to growth rates.




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