Deficit better than expected
The 2022 fiscal deficit is ultimately estimated to be significantly below 2023 budget projections, based on the latest data, confirming the trend seen last month in government budget execution data. These figures, note Finance Ministry sources, could send a positive message to the markets ahead of the expected upgrading of the country’s credit rating.
In particular, the Bank of Greece estimates that, based on the budget data, published in the General Government Monthly Data Bulletin, the primary deficit of 2022 will fall – barring any unforeseen circumstances – to around 1% of gross domestic product – i.e. some 1.2 billion euros lower than the estimate contained in the 2023 budget report for a primary deficit of 1.6%.
These figures explain the ministry leadership’s frequent references to a “looming fiscal space,” which sources say, if confirmed, will be returned in its entirety to society. Actually, the fiscal space is about 2022, but it also benefits 2023 because it is a better starting point. In other words, the adjustment that would need to be made in 2023 in order to reach the target of a primary surplus of 0.7% of GDP will be smaller if it starts from a primary deficit in 2022 of, say, 1% of GDP instead of 1.6% that was foreseen in the budget.
Therefore, there is indeed some scope for further support measures from the government in 2023, which is expected to be utilized ahead of the elections. However, economists stress that the better performance of 2022 should be used mainly to send a signal to the markets that Greece remains on the path of fiscal adjustment and is eligible for investment grade.
The better-than-expected results came mainly thanks to growth, which – with the help of inflation – significantly boosted revenues. At the same time, the containment of spending thanks to the improvement in energy prices played a role, especially at the end of 2022.
According to the General Government Monthly Data Sheet, the primary deficit was €288 million in 2022, compared to €7.42 billion in 2021. Tax revenues amounted to €56.9 billion.
