2022 budget: Greek economy seen returning to 2019 levels

The Greek economy will return to 2019 levels seen before the outbreak of the pandemic in 2022, according to the forecasts from next year's draft budget submitted to parliament. In the two years 2021 - 2022 the cumulative GDP growth is estimated to reach 10.8%. The primary deficit will be significantly reduced, declining to close to zero, but will be much higher than the previous spring forecast, which was included in the Mid Term Program.
 
The draft budget is under review and there will be changes before its final debate in parliament, as measures will be added, which will be discussed by the Finance Ministry with official sector creditors. One of the goals of the measures will be to ease the burden from increased energy costs.

As the Minister of Finance, Christos Staikouras, and Deputy Minister of Finance, Theodoros Skylakakis, emphasized in their comments:

• The first positive macroeconomic results have already been recorded, following the gradual decline of economic effects from the pandemic crisis. The growth rate for the year 2021 is revised significantly upwards, from 3.6% to 6.1%.
• This means that, in relation to the 2020 recession of 8.2% the economy has already covered more than 2/3 of the lost domestic product, in fact within a year.
• In addition, the cumulative growth of the years 2021-2022 increases to 10.8%, 0.8% higher than the forecasts in the mid-term plan, signaling that in 2022 not only will GDP be recover 2019 levels, but will further increase 1.7%.
• A characteristic and structural element of the economic growth that is already in progress, is the significant reduction of the unemployment rate, from 16.8% in July 2020, to 14.2% in July 2021.
• The above result is obviously not only due to the lifting of restrictive measures, but to a large extent to the unprecedented amount of financial support for households and businesses, which exceeds 42 billion euros on a cash basis and 30 billion euros on a fiscal basis for 2020-2022.

According to the draft budget report, a key factor in boosting economic activity in 2022 will be the Greek Recovery plan, with spending from the fund forecast to exceed 5 billion euros per year by the end of the implementation period.

As a result, within 2022 the implementation of the plan is expected to give the Greek economy an additional 2.9 percentage point boost to GDP.
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Another important factor in accelerating growth is the gradual return to normality from a health point of view. The implementation of certain development measures will contribute to growth, such as the reduction of the corporate income tax rate from 24% to 22%, the provision of incentives for mergers and collaborations of medium, small and very small enterprises and the dropping of tax on parental benefits reaching 800,000 euros.

For inflation, the Finance Ministry estimates that the rise will be temporary, with the price index expected to be moderately positive for the whole of 2022 (0.8%), allowing a benefit in terms of real average wage by 0.2% on an annual basis.

A significant change in the draft forecasts was made on Greece's primary deficit for both 2021 and 2022.

In particular, the primary result of the General Government, in terms of Enhanced Supervision for 2021, had been estimated a deficit of 12.3 billion euros or 7.2% of GDP. According to the budget, the primary result of the General Government is now forecast at 13.5 billion euros or at 7.7% of GDP.