Parliament budget office sees hope in new bailout, warns that Grexit is not off the cards

Gazzetta team
Parliament budget office sees hope in new bailout, warns that Grexit is not off the cards
Capital controls will have a grave impact on the Greek economy but the agreement for a third bailout with Greece's creditors gives hope for the future, according to a three-monthly report released on Wednesday by the Parliament Budget Office. It also warned that the country was not out of the woods yet, with both Grexit and default remaining as real possibilities.

"The final agreement with the institutions that is now on the horizon is important in order to avoid the worst in the short-term and not enter into uncertain terrain in the long term," it said.

The report says the decline in GDP on a weekly basis is forecast to be in the region of 1.75-2.8 billion euros for the period from July to September. Based on the European Commission's forecast for a recession ranging from 2-4 pct, it added, the annual loss of GDP for 2015 is estimated to range from 4.0-10 billion euros.

Capital controls were unlikely to be lifted soon, the report said, and the extent of GDP decline would largely depend on their impact on rates of consumption.

"The decline in weekly GDP will reach 2.8 billion euros a week or 1.5 pct of GDP in 2014...in the case that the decline in consumption approaches 80 pct, and 1.75 billion euros per week or 0.9 pct of GDP when the decline in consumption is around 50 pct," it said.

In fiscal terms, the report predicted that Greece would shift from a primary surplus at the start of the year to a primary deficit of 1 pct of GDP in 2015.