Budget for 2018 sees high growth, surplus and more taxes

The government on Wednesday submitted the 2018 budget in Parliament, predicting a higher-than-expected primary surplus, of 3.8 percent of gross domestic product, and a growth rate of 2.5 percent, as well as additional austerity with some 1 billion euros in new taxes. 

The strong growth rate of 2.5 percent is projected to follow a 1.6 percent expansion this year – a figure that has been downwardly revised twice following an original forecast of 2.7 percent. 

In a report accompanying the budget, the Finance Ministry looked forward to an “exit from a long period of programs of macroeconomic adjustment,” referring to Greece’s anticipated exit from its third foreign bailout in the summer of next year. 

The budget – which is to be voted on in Parliament on December 22 – foresees a primary surplus of 2.4 percent of GDP for this year, significantly above a target of 1.75 percent, and 3.8 percent for 2018. 

“The significant overshooting of the targets… has contributed to restoring international trust in Greek public finances and created the preconditions for the country’s return to international capital markets in a sustainable way,” the ministry noted in its report. 

The budget also provides details about a “social dividend,” heralded by Prime Minister Alexis Tsipras last week, for 1.4 million households.

The handout is worth an average of 483 euros, the ministry said, adding that a projected increase in growth rates in the coming years should allow the government to broaden its initiatives for social protection.

The budget also includes a list of 12 measures that were passed in Parliament earlier this year but have yet to be implemented.

They include increases in social security contributions, cuts to heating and oil subsidies, higher tax rates for medium-sized and large properties, the elimination of value-added tax breaks for dozens of Aegean islands that had enjoyed a reduced rate of VAT, and a new hotel stayover levy.

There are fears that the latter could have an impact on tourism, which remains one of Greece’s few dynamic economic sectors. 

The government hopes that the 12 measures will raise around 1 billion euros in revenue.