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In the final stretch the Stability Program

By Tasos Dasopoulos

High growth rates and the continuation of the tax reduction agenda will be included in the revised Stability and Growth Plan 2022-2025 to be sent by the Ministry of Finance to Brussels by the end of the week.

According to information, the only scenario that will include the Greek plan will predict an average growth for the 4 years 2022-2025 to 3% and a decline in inflation that is expected to reach 6% for this year, 2.5% for 2023 and in below 2% for the next two years.

In other words, the Ministry of Finance will forecast the excess of high inflation in fuel and food in one year (in 2022), having a growth of 3.2% and the return of inflation in the region of 2% within the next year, estimating the expiration of the war in Ukraine and the fall in prices.

From this year until 2025, the utilization of the resources, amounting to 50 billion euros, of the Recovery Fund and the NSRF, but also the improvement of the disposable income of the households will give a strong impetus to the growth. The increase in disposable income will come from the continued implementation of the agenda for tax cuts, but also from the increase in the minimum wage and pensions in 2023.

In this direction, the final abolition of the payment of the special solidarity contribution for the private and public sector will be announced for next year, as well as the “permanent” reduction of the insurance contributions by 3% from 2023. At the same time, the increase in pensions, based on inflation, but also a new increase in the minimum wage, commensurate with the growth rate of the economy.

Again in primary surplus

At the same time, the revised Stability and Growth Plan will describe the definitive overcoming of the deficit situation in which the economy was forced by the coronavirus pandemic and the transition of the economy back to surpluses. According to information, the Program will provide primary surpluses which will be in the region of 2% of GDP until 2025.

In this direction, a primary surplus of 1.2% of GDP for 2023 will be forecast, from a deficit of 2% of GDP forecast for this year. This year ‘s primary deficit target will be revised upwards, from the budget forecast of 1.4% to 2% of GDP, due to higher spending on support measures.

Regarding the development of the budget deficit, the PSA 2022-2025 will provide for a reduction of the deficit in 2022 and 2023 and then a balanced budget from 2024 and a surplus for 2025.

For the revenue and expenditure mix, the medium term is not expected to hide any serious surprises. Revenue and expenditure will decline over the years, reflecting continued GDP growth.

Debt at 150%

The Program will also analyze a very significant de-escalation of public debt which is expected to gradually decline to 150% of GDP by the end of 2025, from 191.1% of GDP closed in 2021, as announced on Thursday the Hellenic Statistical Authority.

Debt reduction by more than 40% of GDP in four years will be achieved with stable positive rates of economic growth and its management, in order to reduce the cost of services to lower levels. The key to this issue will be the acquisition of the investment grade, which is expected in 2023.

At the same time, of course, the intention of the Greek government to join the market of so-called “green” bonds will be declared, with a relevant issue in the second half of 2022.

Source: Capital

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