Projection for growth at just 2.7% this year

Projection for growth at just 2.7% this year

The cost of the state’s support measures has again been revised upward, following the new lockdown extension, according to the latest calculations of the Finance Ministry and the estimates of the Parliamentary Budget Office, which cut its projection for growth in 2021 to 2.7%.

Minister Christos Staikouras told Action 24 TV on Monday night that a further set of measures is coming in April. He added that ministry officials now calculate the cost of the pandemic’s support measures far above the level of 11.6 billion euros, which is already a far cry from the budget’s provision for €7.5 billion.

The quarterly report of the PBO estimated on Tuesday that the state’s handouts, which include the support measures, will run to about €35 billion, which is €5 billion more than the budget’s provisions for €30 billion.

The PBO forecast for 2.7% growth this year is among the most pessimistic expressed to date. The European Commission and the government anticipate an expansion of 3.5%, National Bank 4.7%, and only the Organization for Economic Cooperation and Development is more pessimistic, forecasting economic growth of 0.9%. For the first quarter alone, the PBO expects the contraction to amount to 7%.

Nevertheless Tuesday’s report estimates that if state transfers are increased by €5 billion, then the growth rate will accelerate to 3.65%, and if that €5 billion is headed for state consumption, the recovery rate will amount to 4.84%.

A considerable factor of uncertainty which will determine Greece’s gross domestic product this year is the utilization of European resources. The assumption the PBO makes is for public investments, including the projects financed by the Next Generation EU fund, to reach up to €7.5 billion euros, against the budget’s provision for €6.7 billion from the Public Investments Program plus €2.6 billion from the EU, totaling €9.3 billion.

The report estimates that 2020 brought a fiscal deterioration of €20.4 billion, which amounts to a primary deficit of 8.4% of GDP. However, it is explained that the result on paper will be better, as the fiscal rules allow for the exclusion from the deficit of the suspension of obligations and the cheap state loans issued, as they will later be paid back.

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