Greek budget sees economy growing by 6.9% this year, 4.5% in 2022

Greek Finance Minister Christos Staikouras on Friday tabled the 2022 state budget to Parliament. The budget envisages a 6.9% growth in the country’s GDP this year and a growth rate of 4.5% next year, with 2022 expected to be the year of return to normality. The budget also noted that the Greek economy will recover all of its 2020 losses with the real GDP at the end of 2022 exceeding that of the corresponding period in 2019 by 1.7%.

Greek GDP is projected to grow to 187.278 billion euros in 2022, from 177.608 million this year and 165.326 in 2020, the state budget said. The public debt is projected to grow to 355 billion euros (189.6% of GDP) next year, from 350 billion (197.1% of GDP) in 2021 and 341.086 billion (206.3% of GDP) in 2020. The fiscal deficit is projected to fall to 2.296 billion euros (1.2% of GDP) in 2022 from 12.882 billion (7.3% of GDP) in 2021 and 13.036 billion (7.9% of GDP) in 2020.

More specifically, GDP growth will be based on consumption, private investments and exports. Private consumption will increase by 3.3% this year and by 3% in 2022, after falling by 7.9% in 2020. Private investments will grow by 11.7% this year and by 21.9%, after falling by 0.3% last year. Exports are projected to grow by 14.1% this year and by 11.1% next year, after falling by 21.5% in 2020. Imports are projected to grow by 6.6% this year and 8.9% in 2022, after falling by 7.6% in 2020, while public consumption is projected to grow by 4.1% this year and to fall by 2.8% in 2022 due to the gradual withdrawal of support measures.

The unemployment rate is expected to fall to 14.2% in 2022 from 15.9% this year and 16.35% in 2020. The budget report said that the primary factor behind the growth of the Greek economy in 2022 was the Greek Recovery and Resilience Plan and the money from the EU Recovery Fund, which will boost the Greek economy by 2.9 percentage points (without leverage). A return to normality is expected to further facilitate the recovery of the tourism sector, with travel receipts from abroad rising by 60% in 2021. Employment is projected to grow by 2.6% in 2022, while nominal average wages are expected to grow by 1.1%. The inflation rate will be 0.8% in 2022, with inflationary pressures expected to begin falling in the second quarter of 2022, the budget said.

The report stressed, however, that the Greek economic outlook was surrounded by increased external dangers, related with developments concerning the coronavirus pandemic, a possible more permanent nature of inflationary pressures and geopolitical tensions in the wider east Mediterranean region. The climate factor was another danger. Other domestic risks were possible hurdles in the timely implementation of the recovery and resilience plan or the appearance of “permanent scars” from the pandemic.

The general government’s primary deficit will fall to 1.4% of GDP in 2022, from 7% this year, the budget report said. Net revenue – after tax returns – are projected to reach 50.927 billion euros, up 0.9% from targets, with VAT revenue up by 113 million euros to 17.112 billion, while special consumption tax revenue is projected to ease to 6.561 billion euros. Income tax revenues are projected at 9.699 billion euros, up 115 million from targets, while corporate tax revenues are expected to surpass targets by 872 million euros to 3.180 billion.

Budget spending is projected to reach 70.847 billion euros, up 777 million from targets. The primary result of the state budget will be a deficit of 4.620 billion euros in 2022, up 2.048 billion from targets.