Ambitious budget is submitted

The draft text of the 2009 budget is set to be tabled today in Parliament with ambitious targets but clouded in great uncertainty as the international crisis appears far from over. The draft foresees the reduction of the budget deficit to just 1.8 percent of gross domestic product, from a projected 2.3 percent this year and 3.4 percent last year. The cut is based on the assumption that the growth of the economy will decelerate in 2009 to 3.1 percent from about 3.4 percent this year. With the new tax measures planned for next year, the Economy and Finance Ministry is expecting to collect additional revenues of 5.6 billion euros, an increase of 9.5 percent over 2008. On expenditure, the draft budget provides for an increase of 8.5 percent that will take it to around 63.6 billion euros, up from an ambitiously projected 58 million euros for the current year. It remains unknown to what extent the revenues of the current year will fall short of the budget’s forecast, a factor that may well affect the course of next year’s budget too. As a result, the final draft that will be submitted to Parliament in November is likely to differ significantly, with further changes expected in early 2009. Incomes policy will be tight, as it will provide for rises of just 3.5 percent in salaries and 4 percent in pensions, close to the level of inflation anticipated. Nevertheless, the draft budget appears more than ever to be something of a theoretical exercise, as the murky outlook for international economic developments persists and their impact on the local economy may well be multiple.