Upward revision of primary surplus in the 2014 budget

The draft budget submitted on Thursday in Parliament by the Finance Ministry, with the approval of the country’s creditors still pending, provides for a primary surplus of 812 million euros this year – twice that previously forecast – and foresees additional taxes of almost 2.5 billion euros next year.

The ministry has planned for a 5.2-billion-euro fiscal adjustment via an increase of 2.1 billion in tax revenues and trimming social expenditure by 3.1 billion, mostly through cuts to social security and healthcare. “We believe that the budget targets will be achieved and exceeded,” Alternate Finance Minister Christos Staikouras said when asked about the possibility that creditors may force the budget’s revision.

Notably, the budget provides for a primary surplus of 812 million euros this year (revised from 340 million euros) and 2.9 billion euros next year, despite the lag in revenues and problems at social security funds.

Total spending for 2013 is estimated at 52.6 billion euros, which is 780 million euros less than the target set by the medium-term fiscal plan. This is mostly due to a 319-million-euro drop in primary expenditure and a 300-million-euro decline in the amount of interest paid.

The economy will grow 0.6 percent in 2014 following a 4 percent contraction this year, the budget states, while private consumption will shrink by a further 1.6 percent next year. The rebound will be due to an expected 5.3 percent rise in investments.

Taxpayers and enterprises will be asked to pay an additional 2.48 billion euros in income and property taxes in 2014, despite the fact that no new taxes are foreseen. Income tax revenues will reach an estimated 12.9 billion euros, from 11.5 billion this year, due to changes to the tax system, while property tax revenues will rise 1.15 billion euros. Indirect taxation will fetch an estimated 24.08 billion euros, down from 24.5 billion in 2013. Total net revenues will reach 49.69 billion euros, up 4.9 percent from this year’s 47.38 billion.

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