Budget sees lower debt, deficit

The final version of next year’s budget, tabled yesterday in Parliament by Economy and Finance Minister Giorgos Alogoskoufis, forecasts a significant decline in the debt and the budget deficit, and a slight rise in inflation. The final 2008 budget was redrafted after Eurostat approved a 9.6 percent upward revision of Greece’s economic output last month, rejecting Greece’s request for a 25 percent upward review. The final draft forecasts a gross domestic product (GDP) growth of 4 percent – from a projected 4.1 percent this year – while it sees inflation averaging at 2.8 percent versus an estimated 2.7 percent in 2007. It sees debt dropping to 91 percent of GDP in 2008, at -223.32 billion. Under the revised figures, 2007 debt is seen at 93.4 percent of GDP compared to the original 101.9 percent. The government also sees the budget deficit shrinking to 1.6 percent of GDP in 2008 from 2.7 percent this year. Tax revenues will increase by -6.2 billion, -4 billion of which will come from indirect taxes through the increase in consumption tax for fuel products with the leveling of tax on heating fuel and diesel, the imposition of a single property tax and the adjustment of the officially determined property values, known as «objective.» Property tax revenues will soar to an estimated -900 million, a 275 percent rise from this year’s -240 million. Revenues from fuel tax will increase by 45 percent, reaching -4.1 billion from -2.89 billion in 2007. There will be no increase in alcohol and tobacco tax, though. In total, revenues from direct taxation will come to -22 billion, posting an 11.5 percent rise from those of 2007. Income tax revenues will reach -17.1 billion next year, 7.6 percent higher than this year. Of that, -10.8 billion will come from taxpayers and -4.8 billion from companies. Indirect tax revenues will add up to -32.6 billion, which is 13.9 percent higher than in 2007. Alogoskoufis suggested that the main objectives of the government’s tax policy for the completion of the reform are already attained, including the easing of tax burdens on physical persons through the further reduction of tax rates. The 29 percent rate, applied this year, will be reduced to 27 percent in 2008 and 25 percent in 2009, while the 39 percent rate will be cut to 37 percent and 35 percent respectively. The budget also includes -1.6 billion in credit for the support of the financially weaker and for the fulfilment of pre-election pledges. It also allocates -36.7 billion for servicing the public debt. Total expenditures are expected to come to -59 billion, up by 7.3 percent from 2007, while as a percentage of GDP they will rise only marginally to 24.1 percent from 24 percent in 2007. (Kathimerini, Reuters)

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