Contraction at 10% in final budget draft

Contraction at 10% in final budget draft

The final version of next year’s state budget will provide for a 10% economic contraction this year, a rebound to the tune of 4.5-5% in 2021 and a primary deficit of 3% of gross domestic product next year, according to Finance Minister Christos Staikouras and Alternate Minister Thodoros Skylakakis.

Amid the second wave of the pandemic, the budget the government will table on November 21 tends toward the adverse scenario submitted in early October. That provided for an 8.2% contraction this year and a 7.5% rebound in 2021, along with a primary deficit of 1%.

The good news on the coronavirus vaccine may offer a positive outlook, but does not eliminate the fact there are six difficult months ahead, Skylakakis told Parliament on Tuesday. He forecast that the country will emerge from the crisis in the second quarter of next year: “Although I cannot say that with certainty, it is highly likely,” he stated.

Speaking on Blue Sky TV on Monday, Staikouras likewise estimated that this year’s contraction will be in the region of 10% and the rebound will come to 5% in 2021. He also said he expected that the health crisis will be tackled during the first half of next year with a recovery coming in the second half.

The government has set aside enough resources, Skylakakis assured Parliament, adding that now is not the time for wasting cash, but rather for being wise and prudent and assisting those in need so as to see the country get past this crisis that has transpired without anyone being to blame. He did note that budget spending will climb to record levels this year, likely exceeding 70 billion euros. “This is money we are borrowing from the future,” he claimed.

He went on to express his optimism that although the rebound may come later, it will be dynamic. “The rebound can and will be dynamic,” he said. “The indications are there, and Moody’s has upgraded us amid the crisis, it has seen something.”

Skylakakis also referred to the investments announced by Microsoft in Athens and by Volkswagen on the island of Astypalaia, saying they illustrate how the market rates Greece’s prospects.

He further called on all politicians to act responsibly and avoid any provocative statements or actions that confuse people.

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