By Marc Chandler, Global Head of Currency Strategy, Brown Brothers Harriman
This Great Graphic was posted on Zero Hedge. It shows the IMF’s forecast for the Greek economy and the actual performance. Obviously the track record is dismal.
The take-away for Zero Hedge is that the Troika’s forecasts are a “joke”. It seems to me that this is not a very help way to frame the issue. Moreover, the IMF has most recently acknowledged that its models under-estimated the fiscal multiplier–how much output is reduced per unit of austerity imposed.
It is common to see various explanations for Greece missing its deficit targets, including many that attribute it to rampant tax evasion and a deeply rooted in an exaggerated sense of entitlement. No doubt these play a role, but the fact that the Greek economy is imploding faster than the Troika expected, and around which it made its aid projections, also needs to have a central part in any narrative.