Greek budget envisages 2.5 pct growth rate in 2019

The Greek government on Wednesday tabled in Parliament the 2019 state budget which envisages an economic growth 2.5 pct in 2019 from 2.1 pct this year and a primary surplus of 3.98 pct of GDP this year, up from a budget target for a surplus of 3.5 pct.

The Finance Ministry said that this overshooting of the fiscal target offered significant room to use this over-surplus as a social dividend to weaker social groups.

It added that satisfactory fiscal performances in the years 2015-2018, along with an improvement of macroeconomic data, allowed a gradual change in the mixture of fiscal policy with the aim to strengthen households’ available income, supporting sustainable growth and dealing with chronic deficits in social protection.

This change in policy mixture will be implemented through a package of measures: reducing a special property tax by average weighted 10 pct, lowering social insurance contributions for the self-employed, professionals and farmers, lowering taxes on distributed profits, and gradually reducing corporate income tax from 29 pct to 25 pct.

The measures also included subsidizing social insurance contributions for young people aged below 24 years old, introducing a new housing financial support, and strengthening special schools and a “At-Home Support” programme.

The cost of these measures is estimated at 0.5 pct of GDP, up by around 150 million euros compared with fiscal interventions included in a pre-draft budget.

State budget net revenues, on a fiscal basis after deduction of tax returns, are expected to reach 53.806 billion euros in 2019, up 0.7 pct from targets, reflecting a 2.5 pct increase in taxes on goods and services, a 565 million euros rise in VAT and a 51 million euros decline in consumption taxes. Property taxes are projected to ease by 215 million euros, income taxes are projected to rise by 1.8 pct and revenue from social contributions is expected to rise by 8 million euros. Tax returns are expected to reach 4.818 billion euros in 2019, up 633 million from budget targets. Public Investment Programme revenues are projected to reach 3.740 billion euros, up 150 million from targets.

State budget spending is expected to reach 56.956 billion euros in 2019, down 573 million from targets, with primary spending at 49.956 billion euros (down 623 from budget targets). Payroll spending will reach 13.016 billion euros, up 25 million from targets, while Public Investment Programme spending will reach 6.750 billion euros in 2019

The package of positive measures is 910 million euros. The positive measures include the reduction of Real Estate Property Tax (ENFIA) by 260 million euros, the reduction of professionals, self-employed and farmers’ social security contributions by 177 million euros, 400 million euros for housing allowance, 51 million euros subsidy for the insurance of young workers as well as 22 billion euros channeled to special education.

According to the report, the primary surplus will reach 3.98 of GDP creating 855 million euros fiscal room.

The budget plan will be debated in a Parliamentary committee by November 26, before a plenary debate starting December 12. A vote on the budget plan is expected by December 18.