Lowering the 2023 primary surplus bar
The subsidies for electricity and natural gas bills are eating away at the targeted primary budget surplus of 1.1% of gross domestic product for 2023.
In the event that the 2023 support is equal to this year’s, the target for primary surplus will be almost zero. However, the Finance Ministry hopes that the burden will be smaller and therefore the toll on the fiscal result will be limited, with the primary surplus perhaps in the region of 0.7% of GDP. The relevant data will be reflected in the draft budget set to be submitted to Parliament on October 3.
It is noted that in the Stability Program, in April, when the target was set for a primary surplus of 1.1% of GDP for 2023, no fund for electricity subsidies was foreseen.
Economic analysts are not worried about this slippage of the fiscal result as long as it is limited to controlled levels, as they point out that all of Europe is moving in the direction of widening deficits due to the energy crisis. In fact, they argue that the critical element for achieving the investment grade target will not be so much a small deficit against the target for a primary surplus as ensuring political stability after the electoral contest.
For this year, however, the government maintains the target of a primary deficit of 2% of GDP, despite the submission of a supplementary budget of 2.9 billion euros this week. This is ensured thanks to the high growth which, as Finance Minister Christos Staikouras said on Monday, the government now places at 5.3% for this year, against a previous forecast of 3.1%, and at 2.1% for 2023, against previous forecast for 4.8%.
Of the €2.9 billion of the supplementary budget, as Deputy Minister of Finance Thodoros Skylakakis said on Monday, €1.7 billion concerns electricity, while the rest will go to the December allowance for vulnerable citizens, to the heating allowance, to the increase of the beneficiaries of the Exikonomo infrastructure upgrading subsidy program, and to the support of farmers.
Among economic analysts, however, some concerns have also been expressed about the sustainability of the high growth rate, given that it is based on a record rate of about 70% in consumption as well as in tourism, at the same time that the current account balance shows a widening deficit.
