Revision of growth, revenues

Just two weeks after the tabling of the draft budget in Parliament, the government intends to revise its targets for 2009, particularly as far as growth and revenues are concerned. And, given that there will be no change in expenditure, the deficit is going to go up as well. The reason why the Economy Ministry is going to revise its own forecasts is that the initial estimates were too optimistic, especially as regards revenues, at a time when cash flow seems to be missing from all markets. Economy Minister Giorgos Alogoskoufis is said to be waiting for a report of the European Commission before making any definitive decisions. Already the International Monetary Fund has forecast that the Greek economy’s growth will fall to 2 percent next year. The budget draft provides for 3 percent growth of gross domestic product, while the Commission’s estimates are also expected to be lower. The Greek authorities are not likely to fully adopt the Commission’s estimate, in order to maintain the relatively positive climate in the economy. Therefore the revised target will likely be between 2.5 percent and 2.9 percent. But the drop in growth will also force Alogoskoufis to revise lower the target for revenues for the following year. So far, the Finance Ministry has forecast tax revenues in 2009 will grow by 13.6 percent and reach 61.5 billion euros. This will probably drop by some 500-800 million euros in the final draft of the budget, as the freezing of the market due to the lack of cash flow will have a negative effect on revenues from value-added tax in particular, due to the decline in consumption. There will also be a slowdown in special consumption tax revenues, such as that concerning fuel.