ECONOMY

Doubling budget provisions for 2021

doubling-budget-provisions-for-2021

The final 2021 draft budget, to be tabled in Parliament next Friday, will include double the funds seen in the first for containing the pandemic, as conditions have deteriorated considerably, forcing the extension of measures to support households and corporations at least through the first four months of next year.

Finance Ministry officials speak of an adjustment of the tools available “depending on conditions.” It is now estimated that, from 2 billion euros the first draft had provided for, the sum will reach up to €4 billion.

The other major shift the second wave of the pandemic has brought concerns state revenues, which will be considerably lower, particularly in the first four months of 2021, due to the growth shortfall, a ministry source says.

Consequently, the 2021 budget is said to have a primary deficit of about 3% of gross domestic product, in line with the adverse scenario of the first draft, compared to the baseline scenario for a 1% primary deficit.

For this year, Alternate Minister Thodoros Skylakakis told state broadcaster ERT on Thursday that the deficit will be just under 10% of GDP, perhaps 9-9.5%. The public debt will top 200% of GDP, partly due to the further shrinking of the economy this year.

The economic contraction for this year is estimated at around 10%, about two percentage points worse than the first draft. The adverse scenario will be adopted for 2021, providing for a rebound of 4.5-5%, against the baseline projection of 7.5%.

That new forecast regarding next year’s recovery still relies to a great extent (about two percentage points of GDP) on the inflow of resources from the Next Generation EU fund. There is also the assumption that tourism revenues will reach up to 60% of the level recorded last year – this is quite an optimistic assumption, obviously relying on the coronavirus vaccine.

Next week will also see two reports by the country’s creditors, the European Commission and the International Monetary Fund, in the context of their post-bailout monitoring.