The bets of the new budget

By Tasos Dasopoulos

The “change of page” bet for the economy will describe the final text of the 2022 budget, which is submitted to Parliament today.

The basis of the new budget will be the transition from the recovery after the recession of 9% in 2020, to growth. For 2021, after three revisions (4.8% in the 2021 budget, 3.6% in the MTEF 2022-2025, 6.1% in the preliminary budget) now the final draft budget will provide growth for this year close to 7% and it is not certain that the reviews will stop here.

GDP growth will cover the recession of 2020 at the end of the first quarter of 2022, while for the whole of next year, the economy is expected to grow at a rate of just over 4.5%. Then GDP will be higher than it was at the end of 2019.

Greater growth is expected to increase budget revenues by around € 4 billion year-on-year and cut spending by € 11.2 billion without cuts, but only with the withdrawal of support measures expected to exceed this year. the 17 billion euros. These changes will have the effect of reducing the budget deficit from 9.9% of GDP expected to reach this year, to 3.7% of GDP in 2022.

The primary deficit is expected to fall from 7.3% of GDP this year to 1.1% of GDP at the end of next year. Debt will escalate from 205.6% of GDP, where it peaked in 2020 due to the pandemic, below 200% this year and 190% of GDP in 2022.

Reliefs

However, the new budget will not only not contain new taxes, but will repeat, albeit in the form of emergency measures, reductions that apply this year as well, such as the reduction of insurance contributions by 3% and the suspension of the special solidarity contribution for private sector.

There will also be permanent measures, such as a lower tax rate of 22% for businesses, but also reduced tax advances of 80% for legal entities and 55% for business owners, reduced VAT on animal feed and the other announcements of the TIF. The only thing that will be missing will be the reduction in the main and the supplementary ENFIA of 2022 after it was decided that the relevant announcements will be made at the beginning of next year. Also included will be a grid of halving price increases with the heating allowance doubling for this year to € 168 million from € 84 million last winter, as well as € 630 million in electricity tariff subsidies and natural gas.

The premiere of the Recovery Fund

The text of the new budget will include the official start of the recovery of funds from the Recovery Fund. Specifically, absorption of 3.2 billion euros is expected from the total subsidies of 17.8 billion but also the first 600 million euros from the loans of 12.7 billion euros which will finance private investments. Following the pre-financing of specific projects of the Recovery Fund this year, from 2022 Greece will enter the full implementation of the Greece 2.0 program and will have to prove that it can keep up with the demanding timetables and milestones it has agreed with Brussels.

Unofficially, the Public Investment Program of 2022 is expected to reach the end of next year at 11 billion euros, with almost 10 billion euros being from purely Community resources (funds of the old and new NSRF and the Recovery Fund) only 1 – 1.1 billion from purely national resources.