EDS: Growth of 6.9% for this year, 4.5% for 2022

By Tasos Dasopoulos

The Hellenic Fiscal Council considers possible the forecast for GDP growth of 6.9% in 2021 compared to the initial forecast of the draft plan for growth equal to 6.1% and 4.5% in 2022 which will include as a forecast the final draft budget of 2022 if we do not have further increases in energy products and a new extension of the pandemic.

According to the budget forecasts, private consumption will increase by 3.3% for this year and 3% for 2022, investments by 11.7% in 2021 and 21.9% in 2022. Exports will increase by 14.1% this year and 11.1% in 2022. Unemployment is expected to escalate by 1.7% from 159% which is expected to close this year at 14.2%.

As the EDS points out, the growth review for this year stems from the fact that a number of macroeconomic indicators for 2021 are being revised for the better. This improvement appears exclusively as an improved “base result”, since the level of GDP in 2021, does not change substantially compared to what was foreseen in the draft.

Consequently, the forecasts for the year 2022 remain the same. Although the above hypothesis involves some risks, in light of the strong recovery observed this year, it is very likely that the rate of change in 2021 will be at the level of the new forecast. For the rest, the comments contained in the EMS assessment of the draft macroeconomic provisions of the preliminary draft are still valid, assuming that there will be no further increase in energy prices, which will burden the energy costs of businesses and households with potential adverse effects on GDP formation in 2022.

The balance

In particular, the General Government balance in 2022 according to the draft Budget 2022 is expected to show a deficit of 7.4 billion euros, compared to a deficit forecast of about 6.7 billion euros that was reflected in the draft. Both total revenues are higher than the draft (due to the larger change in GDP) and expenditures. Total revenues are projected to increase by 617m euros compared to the preliminary draft, while expenditures by 1.3 billion euros.

The result of local authorities and OKAs is also slightly worse due mainly to the increase in investment costs and the reduction of the provision for net income from insurance contributions respectively, but this is not a source of particular concern.

The draft budget envisages a significant increase in revenues, mainly due to the projected economic growth and the increase in employment. Specifically, the tax revenues of the State Budget are expected to amount to 50,055 million euros, increased by 536 million euros compared to the draft due to the larger projected GDP growth.

The total change in tax revenues between 2021 and 2022 amounts to a total of 3.5 billion euros with excise taxes contributing by about 2.2 billion euros and income taxes by 1.3 billion euros. Also, an increase of 520 million euros of OKA revenues from insurance contributions is projected, due to an increase in employment.

The total expenditures of the State Budget for the year 2022 are projected to reach 65,594 million euros, significantly lower by 5,253 million euros compared to their estimated amount for 2021, due to reduced expenditures to deal with the pandemic. However, these costs appear increased in relation to their projected amount in the MTEF 2022-2025 by 2,600 million euros. The increased appropriations are foreseen in the category “appropriations under allocation” by EUR 1,708 million and mainly concern provisions for dealing with the pandemic and EDP expenditure (EUR 550 million), in the category “purchases of fixed assets” by EUR 528 million for natural armaments receipts and in the “transfers” category by EUR 277 million. Expenditure forecasts in the draft State Budget for 2022 are also increased, compared to those of the preliminary draft by 1,259 million euros, due to a further increase in the provisions for pandemic expenditure, as well as the PDE (350 million euros).

Expenses

The escalating revision of the State Budget expenditure forecasts for 2022 in relation to the corresponding ones of the MTEF 2022-2025 and the preliminary draft, is mainly due to a possible revision regarding an outbreak of the epidemiological phenomenon next year, which will require new measures. its treatment. In other words, they concern a non-permanent forecast, which means that a possible control of the epidemiological phenomenon next year, will cause a restraint of expenditures, with a positive impact on the fiscal result of the General Government. It is noted that the general escape clause will remain in force in 2022, when there is no immediate budgetary constraint.

In this context, there is no need to evaluate compliance with the limits of the “Fiscal Pact”. It should be noted, however, that restoring fiscal rules from 2023 and ensuring the management of high public debt require fiscal vigilance and accountability. Fiscal risks in the implementation of the 2022 Budget may arise from a resurgence of the pandemic that will require new measures to support the economy and strengthen the health system, the potentially prolonged inflationary pressures – especially in energy – which may require countermeasures to be taken. , forfeiture of state guarantees and issuance of court decisions with a negative budgetary impact.