Emergency government spending to mitigate the effects of the pandemic, combined with reduced revenue, will result in a 2020 budget primary deficit in excess of 5% of the country’s GDP, Alpha Bank’s research department estimates.
When it published the budget late last year, months before the pandemic broke out, the government was hoping for a primary surplus – that is, excluding interest payments on the debt – of around 3.6% of GDP.
But the effects of the pandemic and the spring lockdown resulted in revenue being 13.6% lower than budget estimates, while spending exceeded estimates by 16.3%.
Excess spending was due to transfers, such as compensation to employees and the reductions and exonerations in pre-paid tax, as well as increased spending from the Public Investment Program to finance compensation to professionals and businesses.
Greece has a very high debt (196.4% of GDP at end-2020), but with a relatively low profile; gross financing needs for the next two years are around 9.5% of GDP. The average maturity of the loans is 20.2 years and the average interest rate of 1.93% is low.