Revenue better than expected
Officials caution that energy costs could hurt prospects for extra spending this year
Tax revenues in the first seven months of the year were €5.1 billion more than initially estimated, the Ministry of Finance announced Tuesday.
This is not a net gain, as some of the extra revenue had been budgeted for other time periods. Also, some of the extra revenue has already been spent on support measures against the high inflation targeted at households.
Overall, ministry officials estimate the net “fiscal space” created so far at €800 million, referring to the sum that can be used on extra spending, mostly on subsidies and other handouts. Officials estimate that this spending leeway could reach €2 billion by the end of the year, partly because in the Stability Program agreed with Greece’s creditors, the country’s gross domestic product (GDP) for 2022 had been estimated at €197 billion, while the latest ministry estimates put GDP at €204 billion, which would mean an extra €2 billion in tax receipts.
Ministry officials caution that a lot will depend on the prices of natural gas and electricity, which threaten to eat away at the bulk of the available “fiscal space.”
For example, the Stability Program estimated that price subsidies for electricity bills would cost €800 million; it is now estimated that the cost will range between €1.3 billion and €1.5 billion. For the month of August alone, subsidies will cost €250 million instead of the initially estimated €150 million and the cost is likely to rise to between €300-400 million in September. Officials point out that, at present, the price of natural gas exceeds €230 per megawatt-hour, and the price subsidies alone would reach €2 billion.
The government does not believe this worst-case scenario will come to pass, but uncertainty is still high. The measures still envisaged until the end of the year include a new Fuel Pass round for car owners, a more extensive heating fuel subsidy and a new cost-of-living check for the poorest families.
According to Alternate Finance Minister Theodoros Skylakakis, the higher revenue was proof of “the Greek economy’s resilience in the face of the enormous outside pressures it has faced in recent years.”
The primary budget deficit, which excludes debt servicing, in January-July 2022 was €1.167 billion instead of the expected €5.8 billion.
