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Greece’s Growth Higher than Forecast; Budget Deficit Lower

Greece Growth deficit
The bronze equestrian sculpture of Revolutionary War hero Theodoros Kolokotronis in front of the old Parliament Building in Athens. Credit: George E Koronaios/CC SA4.0.

UBS, the Swiss-based investment bank has considerably raised its growth forecast for Greece’s gross domestic product (GDP) for 2022 while the finance ministry in Athens announced a much lower primary deficit than expected.

UBS raised its estimate to 5.7 percent from four percent based, among other factors, on the dynamic recovery of the tourism sector, which, it expects, will post record-breaking revenue of €20 billion—better than the €18 billion achieved in 2019 prior to the COVID-19 pandemic.

Partly because of much stronger growth this year, UBS has revised its 2023 estimate downward to four percent from the previous 4.7 percent.

The first sign that growth would be higher than expected this year was a strong first quarter. GDP rose 2.3 percent quarter-on-quarter and seven percent on an annual basis.

Then came tourism; UBS had estimated 2022 revenue at €15 billion, still a significant rebound from the lockdown-plagued year of 2021 (€10 billion).

There was also a strong recovery in tax receipts in the second quarter, which rose 31 percent compared to the same period last year. In the same quarter, tourism revenue rose 330 percent on an annual basis.

A final factor was the recovery in business lending, boosted by funds from the European Union’s Recovery and Resiliency Facility.

Greece’s budget records lower deficit in January to July 2022 period

Meanwhile, on Thursday, the finance ministry announced that the state budget recorded a primary deficit of 1.161 billion euros in the seven-month period from January to July 2022, significantly down from a target of 5.808 billion euros and a primary deficit of 9.063 billion euros in the same months in 2021.

The figures for the execution of the state budget on an amended cash basis for the seven months show the budget deficit is just 4.585 billion euros—down from a target of 9.180 billion euros included in the budget report for 2022 and a deficit of 12.515 billion euros in the same period in 2021.

Net budget revenues amounted to 33.703 billion euros, up by 4.803 billion euros or 16.6 percent relative to budget forecasts. Higher tax revenues were further increased by the receipt of 644 million euros from ANFAs, which had not been included in the 2022 budget, and a 636 million euros overestimate in the forecast for the returnable advance.

More specifically, budget revenues in various categories were outlined. Tax revenues amounted to 30.148 billion euros, up by 4.221 billion euros or 16.3 percent from targets. The overperformance was due to an extension of the deadline for the payment of vehicle circulation tax, better payment of taxes owed in the previous year, and better collection of taxes in the current year as well as earlier payment of ENFIA property taxes.

Revenues from VAT amounted to 11.968 billion euros, up from a target of 1.153 billion euros while revenues from the Special Consumption Tax on fuels amounted to 3.809 billion euros, down from budget targets by 192 million euros.

Revenues from property taxes were up due to earlier payment of the first three installments of ENFIA, amounting to 1.904 billion euros instead of 1.245 billion euros.

Income tax revenues reached 8.445 billion euros, exceeding targets by 1.053 billion euros.

Higher-than-forecast revenues were earned in the categories “Social Contributions” and “Transfers” (ANFAs) despite a shortfall in Public Investment Program Revenues; the “Sales of Goods and Services” category; the “Other Revenue” categories; and the “Sales of fixed property assets.”

State budget revenues in July 2022 reached 7.444 billion euros, up 2.724 billion euros from the monthly target although this includes the transfer to ANFAs.

State budget spending between January to July 2022 came to 38.288 billion euros, up 209 million euros from targets while payments in the regular budget are down from targets by 581 million euros.

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