Struggling on two fronts

Most economic indicators are judged and understood as a percentage of the gross domestic product (GDP). Such economic indicators include growth rate, public debt and deficit of the budget, using current prices.

The economic reform programme, agreed upon with the International Monetary Fund (IMF) in mid-2016 to be effective as of 2017, assumed that the GDP would rise in 2017 by 6.6 per cent in current prices. Based on this assumption, all other factors were defined, especially the deficit of the budget and the debt, as percentages of GDP.

Unfortunately, the GDP in 2017, after the first full year of the programme, did not rise to the level of 6.6 per cent. Most likely, it will not exceed 5.4 per cent or less.

Things being so, the government is required to make up for this shortcoming by achieving results faster than what was originally estimated.

This state of affairs created a shock; the government will face extra burdens and difficulties. Worse, yet, is the fact that it became necessary to push back certain objectives, and postpone their timely implementation from the scheduled year of 2019, as set under the programme, to the year 2021.

It is, of course, possible to make up for the delay, more or less and faster or slower. What counts, though, is that this trend should not be allowed to continue. Worse, is to need more time and show lower faith in the programme and the ability to carry it on.

Obviously, the government is trying to do two contradictory things at once. It wants economic growth, which calls for increasing public spending and easing monetary and fiscal policies, while at the same time seeks to reform the structure of the national economy, including debt, budget deficit, foreign-exchange reserves and deficit in the current account, all of which call for tight and contraction policies.

The government finds itself working on two fronts; one is an offensive policy to spur growth and another is a defensive policy to protect what we already have and prevent retreat. The question is which course of action will be given the priority over the other.

The IMF displays high flexibility towards what is going on, flexibility that is not always appropriate. It means that the IMF understands the actual difficult situation and agrees to all the amendments created in real life.

This is like starting all over again on a yearly basis, using the previous year as a new baseline. People do not go to the original figures and ratio set in the programme.