Eurobank: The best revisions for the growth rate in 2021 continue

According to the recent forecasts of the European Commission (EU), ie autumn 2021 (November 2021), the real growth rate in Greece is expected to reach 7.1% in 2021, 5.2% in 2022 and 3.6% in 2023, with a strong increase in exports and investment. Taking into account the deep recession in 2020 (9.0%) and the projected recovery for the three years 2021-2023 (16.6%), the annual real GDP in Greece in 2023, is estimated to be higher by 6.1% in compared to pre-pandemic levels (€ 194.8 vs € 183.6 billion), but will fall by 18.7% compared to pre-crisis debt levels (€ 194.8 vs € 239.7 billion). In addition, as of 2019, Greece’s per capita product is in the last positions among the EU-27 Member States. Therefore, in the aftermath of the pandemic, achieving relatively high growth rates over a long period of time without the presence of large permanent deficits should be a central goal of economic policy.

The estimated real GDP growth in Greece in 2023 compared to 2019, is slightly higher than the EU-27 as a whole and much higher compared to other southern countries, such as Spain, Portugal and Italy. The total estimates are as follows: Romania 13.5% (real GDP 2023 vs 2019), Estonia 13.5%, Lithuania 12.4%, Poland 12.3%, Hungary 11.4%, Luxembourg 10.7% , Latvia 10.1%, Slovenia 9.9%, Slovakia 9.1%, Croatia 8.5%, Cyprus 7.6%, Denmark 7.4%, Malta 7.0%, Bulgaria 6.9%, Sweden 6.4%, Greece 6.1%, EU-27 5.6%, Finland 5.3%, Eurozone 5.1%, Netherlands 5.0%, Belgium 4.6%, Czech Republic 4.6%, Germany 4.3%, France 4.3%, Austria 4.1%, Italy 3.2%, Portugal 3.2% and Spain 2.8%.

Based on the above estimates, the countries of Baltic and Central Eastern Europe are expected to have the highest cumulative growth 2019-2023 among the EU-27 Member States, while the countries of the South, except Greece, the lowest. In this result, in addition to the non-uniform recession experienced in 2020 by the aforementioned economies, on average convergent forces also play a role, due to the large discrepancies in the per capita output of individual countries.

Regarding the two years 2021-2022 and the case of Greece, two elements differentiate the autumn forecasts of the European Commission from the corresponding summer ones (July 2021). First, the peak of the cyclical recovery from the COVID-19 coronavirus pandemic is expected to be achieved in 2021 and not in 2022 (see Figure 2), a feature that is also recorded in the estimates of the 2022 budget report. In the two years 2021-2022, it was revised upwards by 2.1 percentage points, with real GDP in 2022 estimated at 2.5% higher compared to pre-pandemic levels. We note that in the middle of the winter of this year, in the middle of the implementation of the 2nd and extended round of restrictive measures, the European Commission predicted that the real GDP in Greece in 2022 would be lower by -2.2% compared to 2019.

The improvement in the assessments of the course of the Greek economy, which is reflected in the reports of all domestic and international organizations published recently, is based on the following factors: First, on the resilience of the economy to the restrictive measures followed by the first strong lockdown. The results of the national accounts for the 4th quarter of 2020 and the 1st half of 2021 were much better than expected. At the same time, however, the budget deficit was high. Second, to the positive surprise in the tourism sector, with tourism revenues in the 9 months of January-September 2021 showing an annual increase of € 5.1 billion at current prices and amounting to 54.4% of travel receipts in the corresponding period in 2019. Third, in the positive expectations, for the medium-term course of the economy, created by the Fund for Recovery and Sustainability (TAA). Following the projected cyclical recovery (the negative output gap is expected to be eliminated in 2021-2022), the TAA and the necessary reforms can support the growth of the economy. However, there are downside risks. The energy crisis and the resurgence of the pandemic in Greece and abroad are hotbeds of uncertainty.

In addition, the lifting of support measures, both at fiscal and monetary policy levels, will incur an adjustment cost. In the long run, the main downside risk, which has existed for several years, is demographic.

The tax revenues of October 2021 showed resistance, recording an increase of 7.4%

According to the provisional execution data of the state budget (CP), on a modified cash basis, for the period January – October 2021, the primary result amounted to a deficit of € 7,204 million, against a target for a primary deficit of € 7,272 million (which has included for the corresponding period of 2021 in the explanatory report of the Medium Term Fiscal Strategy Framework (2022-2025) and primary deficit of € 9,065 million in the same period of 2020. The Balance Sheet showed a deficit of € 11,522 million against a deficit target of € 11,576 million. (ie lower deficit by € 54 million) and compared to a deficit of € 13,451 million for the corresponding period of 2020.

More specifically, in the 10 months of January-October 2021, the net income of KP amounted to € 44,131 million, showing a negative deviation from the target by € 338 million (or 0.8%), while compared to the corresponding period of 2020 showed an increase of 14.9%. This deviation from the target is due to the fact that the installment from the Recovery and Resilience Fund (TAA) of € 1,718 million was not finally received within October 2021 – as foreseen in the MTEF 2022-2025, but was shifted over time. in the next year. Therefore, without it, net income increased against the target by € 1,380 million (or 3.1%), which is mainly attributed to the increased tax revenue by € 1,236 million (or 3.3%).

In particular, in October 2021 the net income amounted to € 4,681 million, reduced by € 1,696 million (or 26.6%) compared to the monthly target, however if we exclude the aforementioned event with the time shift of the installment by the TAA amounting to € 1,718 million, net income is slightly higher than the target by € 22 million (or 0.5%). Tax revenues amounted to € 4,963 million, up € 341 million (or 7.4%) from the monthly target.

On the expenditure side, restraint was recorded against the target of € 392 million (or 0.7%), mainly due to the under-execution of the PDE and TAA arm by € 479 million. During the period of 2020, there was an increase in total expenditures by € 3,791 million (or by 7.3%), due to the increased emergency expenditures related to dealing with the pandemic, with the total measures in the 10 months of January-October 2021 amounting to € 7.9 billion