Recovery budget (11.7% in 2021-2022), investments (+ 22%), high uncertainties – due to pandemic inflation – increase in tax revenues (+ 3.479 billion euros) and in minimum wage. These are some of the key components of the state budget that is currently being voted in the Greek Parliament, in the shadow of the new wave of Covid-19 and the price rises.
In tonight’s “battle” of the counterclaims between the political leaders, the size of the economy, the expectations for the growth, the employment, but also the expenses due to the pandemic and the support measures are being scrutinized. The Greek government has said that there will be provisions for the support of the citizens against the energy price rises, which subsidies are expected to be announced by the Greek Prime Minister, Mr. Kyriakos Mitsotakis, from the Parliament, tonight.
Inflated energy bills have weighed on households despite government subsidies, while, at the same time, rising inflation could erode incomes and growth. In the baseline scenario the energy pressures will be maintained until the first quarter of 2022 and, therefore, if prices do not de-escalate, then the concerns are high (in combination of an unfavorable development in the pandemic) that is going to threaten the budget and the economic growth.
And GDP growth and increased fears
The strong recovery of 2021 is a good starting point for 2022, but it is not as easy as it seems. According to the Ministry state that there are high uncertainties due to the pandemic and the energy crisis. Moreover, the scientific data have not yet been examined in the light of the spread of the Omicron variant. The other uncertainty is the energy crisis, while the Ministry of Finance supports that the fuel prices will be those to determine the growth rates, something that will be revealed in the first quarter of next year.
According to the unfavorable budget scenario, the reduction of the nominal growth rate by 1%, in 2022, to 3.5%, means that GDP will reach 185.5 billion euros from 177.6 billion euros in 2021, compared to a nominal GDP of 187.3 billion euros, in 2022, which is the basic scenario. Such a change in the level of nominal GDP would lead to a deterioration of the fiscal result by 0.5% of GDP compared to the 2022 Budget scenario. According to the Parliamentary Budget Office, “the implementation of the projected budget figures contains significant uncertainties stemming from the alarming development of the pandemic (with our country remaining in the worst European positions in terms of health effects, the course of vaccines) permanent losses from the recession caused by the pandemic, the degree of ability of taxpayers to meet their obligations and, finally, the possibility of a change in the monetary policy due to inflationary pressures “.