Stability Program: Return to strong growth in 2023

By Tasos Dasopoulos

The overcoming of the current energy crisis, with acceleration of growth from 2023 and significant fiscal adjustment, will be described in the revised Stability Program 2022-2025, which is being intensively prepared by the Ministry of Finance.

According to information, the basic scenario for the economy wants the growth rate to slow to 3.5% for this year, from 4.5% projected in the 2022 budget, due to the much higher inflation triggered by the energy crisis and then the war in Ukraine. However, in 2023, growth will accelerate to 4.5% given that the war is over and food and fuel prices are de-escalating. The inflation forecast for this year is expected to be revised in terms of a harmonized index of consumer prices to 5% from 0.8% projected in the budget, and to 2.5-3% for 2023.

Officials of the Ministry of Foreign Affairs explained that the relatively small impact of the crisis that the European economy is going through today for Greece is due to the small exposure of trade and tourism with the two countries that are at war. Also, Greece’s dependence on Russian gas does not exceed 40% compared to 60% in Germany and 90% in Slovakia and Finland. All this at a time when the initial forecast for growth of 4.5% for this year was quite conservative, without taking into account the transmitted positive impact of 1% of GDP in 2022 from 2021 due to the higher than expected growth rate of the economy.

Fiscal adjustment

However, along with the remarkable growth rates of Greece, the goal of fiscal adjustment will be achieved, which is a priority for the partners, but also for the markets. The primary deficit for this year, due to the slowdown in growth and revenues, is expected to increase from 1.4% of GDP – projected in the budget – to 1.8% of GDP, while the budget deficit will increase from 4 % provided for in the budget at 4.5%. For 2023, the primary balance is expected to be in surplus by 1% of GDP while the budget deficit is expected to be zero. In other words, from next year, in addition to a primary surplus for the first time after 2019, we are expected to have a balanced budget.

The most impressive de-escalation is expected to be the critical size of the debt. Specifically, the debt as a percentage of GDP for 2021 will be revised from 197.1% projected in the 2022 budget to 194%, due to the higher growth rate of the economy. In 2022 the debt is expected to decrease by 10 percentage points and reach 184% with the prospect of reducing to 178% by the end of 2023.

The Medium Term 2023-2026

The forecasts of the Stability Program have begun to be finalized based on the data that currently exist for the Greek economy. The Commission is expected to publish its spring forecasts for EU countries in early May. a common European stance on curbing fuel and food accuracy. These decisions are expected to improve the data and forecasts for Greece as well. The new forecasts will be reflected in the revised Medium-Term Fiscal Strategy 2023-2026, which will be sent to Brussels by the end of May.