Country Economic Forecasts > Greece

After a positive start to the third adjustment programme, which saw the Greek parliament pass two separate sets of milestones, planned reforms are beginning to face more sustained opposition. The IMF has been calling for more fiscal consolidation in order to achieve the programme target of a primary budget surplus equal to 3.5% of GDP in 2018. But after six years of austerity, the Greek government is reluctant to undertake any fiscal tightening that was not explicitly indentified in the programme memorandum of understanding.However, Greece's creditors have reached an accommodation, in effect agreeing with the IMF's fiscal arthimetic and accepting that debt restucturing now has to be explicitly considered alongside the programme targets. This could lead to lower debt service costs, easing the pressure on the budget. Although Q4 2015 GDP was revised from a 0.6% fall to a 0.1% increase, this was due to a sharp bounce in investment that is unlikely to be repeated. Given the front-loaded nature of the economic adjustment programme, we expect Greek GDP to fall by 1.2% this year and then to be broadly flat in 2017.