ECONOMY

No change to main budget targets

no-change-to-main-budget-targets

The 2016 state budget, whose final draft is due to be tabled in Parliament on Friday, will include a forecast for a milder recession this year and next, but the fiscal targets will not change. The budget will also reflect all the new measures and reforms that must apply, such as the interventions in the social security and tax systems.

The first draft of the 2016 budget provided for a gross domestic product contraction of 2.3 percent in 2015 and 1.3 percent in 2016. However, the European Commission predicted this fall that the recession would come to 1.3 percent in 2015, and sources are saying that the latest government estimates forecast a GDP contraction below 1 percent and closer to 0.5 percent.

This shift followed the announcement by the Hellenic Statistical Authority (ELSTAT) of GDP data for the third quarter: The economic contraction amounted to 0.4 percent year-on-year, while the economy posted total yearly growth of 0.36 percent in the first nine months of the year. That would mean it would take a 6.7 percent contraction in the fourth quarter for the 1.3 percent forecast to prove true, which the Finance Ministry considers unlikely.

That positive development for 2015 will have an impact on 2016, ministry officials note, implying that the recession next year will likely be below 1 percent.

However, the improvement will not affect the fiscal targets for next year. “The targets of the budget are unchanged,” said a ministry official. The first draft included an estimate for a primary deficit of 0.24 percent of GDP this year and a primary surplus of 0.5 percent in 2016. The official added that the improvement in GDP figures will simply make it easier to achieve those targets easier. What will be different will be the targets for revenues and expenditure. The final draft will also include the latest interventions, including the imposition of a special consumption tax on wine.