Tight fiscal outlook for 2023
The draft budget the government is submitting to Parliament on Monday is an attempt to maintain balance. It hands out what the prime minister promised last month and nothing more, Finance Ministry sources assure.
At the same time, it will keep the country’s promise to the institutions to move to a primary surplus. It will not be 1.1% of gross domestic product, as the Stability Program had predicted, but rather a surplus, somewhere between 0.5% and 1% of GDP, according to the same sources. To compensate for this retreat, it will reduce this year’s primary deficit below the 2% of GDP foreseen by the Stability Program, so the size of the adjustment will be about the same.
By reducing this year’s deficit, the government has tried to respond to the recommendations of the European institutions. It is no coincidence that the European Stability Mechanism mission chief in Greece, Paolo Fioretti, suggested last week that the government save fiscal space from this year to be able to take additional measures in 2023 if needed, as it may then have little margin to move due to the scheduled return to primary surplus and also a growth slowdown or even recession.