Growth twice that of eurozone
The European Commission projects now that the Greek economy will expand by 2.4% in 2023
Monday’s spring forecasts by the European Commission point toward a higher growth rate and extra fiscal space, for use by the next government.
Brussels revised its growth forecasts to 2.4% for 2023 (from its previous winter forecast of 1.2% and the latest government forecast for 2.3%) and 1.9% for 2025 (versus a winter forecast of 2.2%), on the back of an overall upward revision to its eurozone estimates as recession is avoided.
In addition, however, it predicted a large increase in the primary surplus from 0.1% of GDP in 2022 to 1.9% of GDP this year and to 2.5% of GDP in 2024. It should be noted that the government has foreseen in the 2023 Stability Program a primary surplus of 1.1% of GDP this year. This means the Commission sees a 0.8% of GDP or €1.6 billion higher surplus.
If its prediction is confirmed, the next government will have such fiscal room to move, with additional support measures, unless it chooses to run the highest surplus to satisfy rating agencies in view of achieving investment grade. In any case, it will be the last chance for such measures, because then the new Stability Pact will be implemented, setting targets for surpluses of 2-2.5% of GDP for Greece.
The fact that the budget was drawn up assuming a natural gas price of 120 euros per megawatt-hour supports the assessment of higher growth and a larger surplus, while this has fallen to €35/MWh. Therefore, according to a top Finance Ministry source, €4 billion or 2 percentage points are added to the GDP and the growth rate is predicted to be over 3%, maybe even 4%. This in turn translates into additional fiscal space of at least 0.3-0.4% of GDP, or €600-800 million.
European Commissioner for the Economy Paolo Gentiloni commented on Greece: “Generally I believe that the results are very positive, we have a forecast of 2.4% for growth this year, which is twice the average of the eurozone, and of course we will see how it evolves next year. It’s hard for me to highlight any negatives when we have so many positives.”
