Tourism called to save the day

Finance Ministry officials are betting on extra revenue from tourism to fund any additional support measures to households to help alleviate the burden of rising prices. And, thus far, the tourism sector seems to be obliging, thanks to a record season.

So far, all extra revenue, and then some, is going toward subsidizing the cost of electricity for households and businesses.

According to data provided by the General Accounting Office (GAO), the extra revenue in the period from April to July was about €200 million a month, for a total of €800 million. All that money has been spent on subsidizing households. Electricity bill subsidies that limit consumer charges to €0.15-€0.17 per kilowatt hour cost the budget €200-€250 million per month, with another €900-€950 million provided by the European Union’s Recovery and Resilience Facility. August subsidies may even cost the budget a little more, close to €300 million, GAO officials say.

If tourism, as it seems, lends a hand by producing revenues on top of the €200 million outperformance of the previous four months, there could be a fiscal margin for a “tourism dividend.” Debates within the government revolve around a new support tool against inflation for vulnerable households. This could be something along the lines of the one-off cost of living checks that cost the state some €320 million. Raising the heating fuel subsidy is also on the table.

Any extra support measures will be announced by Prime Minister Kyriakos Mitsotakis on September 10, in his keynote speech at the Thessaloniki International Fair.

In an interview Monday with Skai TV, Finance Minister Christos Staikouras appeared certain tourism will provide additional revenue. Early estimates were that tourism revenue would be about 80% of that reported in the record 2019 year, that is €15 billion. Now, estimates are at 100% of 2019’s revenue, just over €18 billion.

“It appears that extra fiscal space will be created during the summer, which will be used in its entirety to the benefit of society from September onward,” he said. At present, the ministry will not change the primary budget deficit target, that is, excluding debt servicing, of 2% of GDP.