The Strategist

Greek Ministry of Finance submits 2021 draft state budget with GDP growth expected at 7.5%.

10/06/2020 - 05:06

On Monday, the Greek Ministry of Finance submitted to Parliament a draft state budget for 2021, which provides for a 7.5% GDP growth and reduction of the primary state budget deficit (excluding external debt payments) to 1% of GDP.

by Ωριγένης
by Ωριγένης
The Ministry of Finance of Greece submitted to the Permanent Commission on Economic Affairs of the Parliament a draft state budget for 2021, which provides for "a GDP growth of 7.5% and reduction of the primary deficit of the state budget to 1% of GDP, if the health crisis will develop smoothly and from the funds of the EU will come the promised funds.

The draft budget also foresees an unfavorable scenario of slowing down the GDP growth by 3% (up to 4.5%), if the pandemic "shows its teeth" and the primary state budget deficit reaches 3% of GDP. The project also includes a forecast of increased spending on armaments up to €2.5 billion and a detailed list of measures to support Greek enterprises and populations.

"Depending on the development of the pandemic, it is possible that by the end of the year additional fiscal interventions will be undertaken, which will be included in the draft budget for 2021," said the Ministry of Finance.

Introducing the document, Finance Minister and his First Deputy stated that it was being developed at a time when the world economy and societies continue to suffer from the worst epidemiological crisis of the last century and, as a consequence, the worst global annual recession since the end of the Second World War. Ministers pointed to the paradoxical and extremely unfavorable conditions and serious uncertainty regarding the likely timing of the end of the pandemic and the return of the world economy to a path of normalcy, significant recovery and sustainable growth.

Representatives of the MoF also mentioned the possibility of "using the resources of the [European] Recovery Fund and React EU". "These resources accelerate the country's recovery, adding two percentage points to growth in 2021, increasing it from 5.5% (baseline scenario) to 7.5% (final draft forecast). With an unfavorable scenario of a pandemic either in 2020 or in the second quarter of 2021, next year's growth will be reduced as a percentage of GDP to 4.5-5%," they said.