Greece is predicting it will emerge from its six-year recession next year, a draft budget forecast on Monday, in a sign that the country may be finally recovering from its debt crisis. Greece plans to return to bond markets in the second half of 2014.
Twice bailed-out Greece also confirmed it would post a budget surplus before interest costs in 2013, a year ahead of schedule.
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 small surplus of 340 million euros this year, according to the 2014 draft budget. The overall deficit will be 2.4 percent of GDP both this year and next.
According to the 2014 spending plan, the Greek economy is expected to grow 0.6 percent next year after a 4 percent contraction in 2013. The average unemployment -- which recently topped 28 percent of the workforce -- is expected to ease to 26 percent in 2014.
Greece's economy has shrunk by 23 percent since 2008, and it has been dependent on rescue loans from other European Union countries and the International Monetary Fund since 2010.
In exchange for the 240 billion-euro financial rescue, Athens had to eliminate the primary deficit this year and post a primary surplus of 1.5 percent of GDP in 2014. The harsh spending cuts and tax increases forced tens of thousands of businesses into bankruptcy and devastated the economy.
"As of this year, those sacrifices have taken hold," Deputy Finance Minister Christos Staikouras said at a news conference. "This budget shows the first indications of Greece's exit from the crisis."
Under its latest bailout program, Greece will be financed until the second half of 2014. “We are taking steps so that a return to the markets in the second half of 2014 becomes viable,” Staikouras said.
Whether the country's international creditors will agree with the brighter picture still isn't clear. Some analysts remain cautious.
“Greece’s debt situation looks unsustainable,” Marios Maratheftis, global head of macro research at Standard Chartered Bank, said in a note to clients.
After peaking at around 176 percent of GDP this year, debt is expected to decline to 124 percent in 2020 (according to the IMF country report, July 2013). This, coincidentally, is close to the levels that triggered the crisis in 2009 (113 percent in 2008 and 130 percent in 2009).
Maratheftis added: “These projections assume that everything will go according to plan, but projections so far have proven to be too optimistic. The euro area will soon have to decide on another bailout plan for Greece, or ideally a substantial debt write-down. This would imply that the European Central Bank, and ultimately taxpayers in northern European countries, would incur losses.”
Greece will submit a final budget in November.