Draft budget discounts likelihood of oil crisis
Τhe government will submit the first draft of the 2025 state budget to Parliament on Monday, in the shadow of the war in the Middle East, toeing a conservative line, but without incorporating a very negative scenario of soaring energy prices.
The government, according to a senior source, believes that at the moment such a scenario, which would bring about serious macroeconomic problems, does not have a high chance of being implemented. After all, this is also what the markets show.
Following the directives of the European Commission, as did the other member-states, the budget – like the Medium-Term Fiscal-Structural Plan presented on Monday – has been drawn up assuming an oil price of $80 per barrel and inflation of 2.2%. With Iran’s attack on Israel, there was an increase and prices reached around $75 a barrel for Brent on Thursday.
It is unknown how long the rally will continue for, as this certainly depends on developments in the region. At the Ministry of National Economy, however, they do not even want to think about the possibility of repeating scenarios, such as those of the energy crisis, which came as a result of the Russian invasion of Ukraine. According to government calculations at the time, the cost of the support measures in 2022 reached 12.5 billion euros, of which about €10 billion concerned electricity subsidies.
In the 2025 budget the picture is completely different. The government, as it emerges from the Medium-Term Plan, is aiming for a primary surplus of 2.5% of GDP and – most importantly – is committed to a €3.7 billion ceiling for spending increases. The budgeted increase in spending is €3.6 billion, leaving a margin of just €100 million, which is not enough to even remotely cover the costs of an energy crisis.
Ministry sources point out that this year’s budget was drawn up with a provision for a €1.1 billion increase in expenses, and eventually the increase will be €2.6 billion. The primary result will be better than forecast, with the primary surplus reaching 2.4% of GDP, instead of 2.1%.
