Favorable forecasts for this year’s deficit

By Tasos Dasopoulos

The first measures of fiscal adjustment that must be made in 2022, in order to have a smooth landing of the economy in the fiscal rules in 2023, will be made from this year through the highest growth.

The primary deficit reached 7.9% of GDP in 2020 due to the pandemic. This year, it is expected to fall to 7% of GDP with the prospect of escalating to 1.4% of GDP at the end of 2022. However, based on the budget execution data for the 10th year, we have an improved primary result, better by 620 million euros, reaching 7.454 billion euros at the end of October against the 10-month budget deficit target of 8.074 billion euros. This development is mainly a result of the better course of revenues which in turn is a result of higher growth.

A primary deficit just below 7% will lead the budget to execute, as planned, to an almost marginal primary deficit of 1% or perhaps lower by the end of 2022, giving it a 2023 fiscal management advantage.

The significant possibility of having a smaller primary deficit was mentioned in yesterday’s reports by both the Budget Office of the Parliament and the Hellenic Fiscal Council in their reports yesterday.

In particular, in the report for the third quarter of the year, the Budget Office of the Parliament notes that the data for the decade January-October 2021 show a slightly better picture than the previous year, which, if maintained – in combination with the highest GDP – may lead to a smaller primary deficit in 2021 than projected in the 2022 Budget.

The Hellenic Fiscal Council, in turn, stresses that the forecast that the primary budget deficit for the 10 months was 3.4% of GDP, ie significantly lower than the budget target of 7.3% of GDP. It therefore concludes that the official forecast for a primary deficit in the region of 7% of GDP will be maintained but it is very likely that the result will be a lower primary deficit.

The Ministry of Education

The same estimate for the primary deficit is made by the Ministry of Finance but in much softer tones. Competent sources of YPOIK estimate that the primary deficit for this year will be actually lower than the official forecast of the Ministry of Finance.

However, they also explain their reservations as, as for GDP, there are great and important uncertainties in the final of 2021, such as the continuation of the pandemic with the onset of the “Omicron” mutation and the rally of international prices for oil and gas. In addition, despite the good course of revenues so far, nothing prevents the climate from reversing even in December, affecting the whole year due to a pandemic. The current month, it is reminded, is extremely important for the total revenue in 2022 as it also contains the movement of the Christmas holidays which increase the turnover from 4 to 6 billion. euro.

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