Exclusive - Greece to overshoot budget surplus targets in 2017, 2018: government official

By Lefteris Papadimas

ATHENS (Reuters) - Greece expects to overshoot its budget surplus targets for a third consecutive year in 2018, a senior government official said on Monday, an outcome that could help ease the austerity burden imposed on a recession-weary population.

In a final budget draft due to be submitted to parliament on Tuesday, Greek authorities will outline projections of a primary surplus - the fiscal surplus excluding debt repayments - of between 2.4 and 2.5 percent this year, and of more than 3.7 percent next year, the official told Reuters.

The figures mark an upward revision. A draft budget submitted on Oct. 2 had put the surplus at 2.2 percent for 2017 and 3.57 for 2018.

A strong fiscal surplus could allow the government - facing public fatigue with pension cuts and tax hikes - to redirect funds to vulnerable sections of the population hit hardest.

"It makes more room for targeted social and tax policy interventions," said Nikos Magginas, an economist at National Bank.

The overall narrative for Greece was still challenging when taken into context, said Takis Zamanis, chief trader at Beta Securities.

"While positive, it cannot on its own give a positive push to markets. The landscape is not favourable to investors or businesses and banks still have their problems," Zamanis said.

Businesses are heavily taxed, while banks are heaving under a mountain of non-performing loans.

NASCENT GROWTH

Authorities are also now expecting a 1.6 percent expansion in output this year, down from a previous forecast of 1.8 percent, said the official, speaking on condition of anonymity.

The Greek economy is expected to expand by 2.5 percent in 2018, the official added, up from a 2.4 percent forecast.

The revision, the official said, was "in line with European Commission expectations".

Greece has been in almost continuous recession since 2008, barring a brief sliver of growth recorded in 2014, and forced by three successive bailouts to carry out reforms that have included deep spending cuts and tax hikes. Its economy has shrunk by a quarter since the onset of the recession.

However, over the past year it has seen nascent growth from a resurgence in tourism and a pick-up in domestic demand.

Tourism revenues spiked 10.3 percent for the first nine months of this year to 12.99 billion euros (£11.5 billion) compared to a year ago, data from the Bank of Greece showed on Monday.

Greece's third financial bailout, worth up to 86 billion euros and brokered in mid-2015, is expected to expire in August 2018. At that point, Greece expects to be able to finance itself in financial markets, though some bailout cash will be put aside and remain in the bank.

"The final draft of the budget forecasts a cash buffer exceeding 15 billion euros for the post-programme period. That will be derived mainly from creditors' financing, but also from revenues from new (bond) issues in 2018," the official said.

Parliament is expected to vote on the draft budget in December.

(Additional reporting by Angeliki Koutantou, writing by Michele Kambas; Editing by Gareth Jones and Janet Lawrence)