Gr. Parliamentary Budget: Positive prospects for the economy – Challenges from the continuation of price increases and pandemic

By Tasos Dasopoulos

The positive perspective of the economy for 2021 and 2022 is pointed out by the Budget Office of the Parliament, noting that the increase in inflation will affect us in 2022, while there is even the uncertainty of the pandemic with the Omicron mutation.

Specifically, the report points to the high growth rate (13.4%) achieved by the economy in the third quarter of the year, which was the second highest in the Eurozone. In fact, the head of the Office Mr. Frangiskos Koutentakis stressed that if the improvement in relation to the targets in the primary balance by 620 million euros for the 10 months of January-October continues in the fourth quarter, we will have a slightly lower primary surplus time.

He attributed the rise in the third quarter to a sharp rise in exports, especially in services, as a result of the tourism recovery in July. In fact, the increase in the tourism product was the main reason for the reduction of the current account deficit in the nine months by about 2 billion euros.

Regarding the course of inflation, he stressed that both the increase in producer prices in industry, which increased by 23% in the third quarter, and the import price index in industry, which increased by 32.9% in the same period, foreshadow a continuation of price increases. This is due to the fact that part of the increase in the prices of industrial products at wholesale will be transferred to retail prices and will affect family budgets and part of 2022.

He stressed, however, that in terms of harmonized CPI, Greece had inflation of 4% in November, but was about one point away from the average inflation of the Eurozone, which reached 4.9%. He also reminded the positives of inflation, noting that the rise in inflation also reduces the real value of debt, public and private.

However, Mr. Koutentakis pointed out the danger that the persistence of price increases will lead the Central Banks to redefine their attitude towards the favorable monetary policy they have been pursuing in recent years.

Especially for Greece, he stressed the importance of the protection umbrella that the ECB opened over Greek securities after the end of the PEPP next March. He specifically said that even with the suspicion that Greece will be permanently left out of the bond buying programs by the ECB, the yields of the Greek ten-year period increased in relation to the corresponding Italian one, while until then identical paths followed.

As a second major uncertainty he mentioned the continuation of the pandemic with the Omicron mutation which may create increased needs for support measures depending on the intensity of the increase in cases and deaths.

Elsewhere, the report notes a 3.1 billion increase in new arrears to the tax authorities at the end of October compared to October 2020. This increase is estimated by the new arrears of € 7 billion less receipts and write-offs of 5.2 billion euros, plus the overdue debts on 1/11/2020 that were later confirmed, amounting to 1.3 billion euros.

It is also noted that the total number of pending main retirement applications decreased slightly, from 125,504 at the end of June 2021 (and an estimated cost of about 428 million euros) to 125,373 (and an estimated cost of about 420.4 million euros). Overdue (over 90 days pending) retirement applications increased from 98,695 at the end of June 2021 (estimated cost around € 410.4 million) to 99,404 at the end of September 2021 (estimated cost around € 408 million).