A series of optimistic assumptions accompany the draft Greek 2019 budget – the last budget submitted by the current leftist-rightist coalition before general elections are held next year – and which are crucial in meeting major annual fiscal and macroeconomic targets.
The draft budget, which was submitted to the Commission on Monday, among others forecasts that Greece’s systemic banks will meet a goal of reducing non-performing loans (NPLs) by 16.9 billion euros in 2019. At the same time, the 2019 budget includes a supposition that banks will also increase new lending and continue to attract more deposits.
In an even more risky assumption, the 2019 budget forecasts that yields for 10-year Greek bonds will drop below 4 percent, whereas investments in the thrice bailed-out country will record a double-digit percentage point increase.
Meeting budget targets next year is also linked with a continued decrease in the unemployment rate, which itself takes into account that the active native-born population (15 to 64 years old) in Greece will continue to shrink.
The high degree of uncertainty hovering over the 2019 draft budget lies in the fact that even if all of these assumptions prove true, various unpredictable factors remain, such as elections in Greece and Europe, looming Brexit, a “tug-of-war” between Italy and Brussels, Turkey’s economic woes and the possibility of a worsening trade war between the US and its major trading partners.
