Budget Office in the House of Representatives: Five “opportunities” and four “risks” for the economy

The Greek economy is projected to grow by 2.3% in 2024, according to the Budget Office of the Hellenic Parliament. This estimate is slightly lower than its initial forecast but higher than the government’s prediction of 2.2%, and still faster than the average growth rate in the Eurozone.

As emphasized by the coordinator of the Office, Mr. Giannis Tsoukalas, during the presentation of the report for the second quarter, the prospects for the Greek economy are positive for 2024 and 2025. Mr. Tsoukalas highlighted five points that support these positive prospects in the near future:

1. 1. The recent upgrades of the four Greek banks and the establishment of a fifth banking pole are expected to enhance competition in the sector, leading to favorable outcomes for the breadth and cost of financing the economy.
2. 2. The recent acceleration in the allocation of resources from the Recovery and Resilience Fund, provided it gains momentum, is expected to boost investment spending, productivity, and the GDP growth rate.
3. 3. The positive growth rates of tourism revenues recorded for the period January–July 2024, if maintained, will enhance overall economic activity and public revenues beyond expectations.
4. 4. The implementation of measures announced at the Thessaloniki International Fair (TIF) regarding the increase in the supply of available housing may counteract the rising trend in housing costs, thereby enhancing the purchasing power of incomes.
5. 4. The new bill introducing incentives for mergers and acquisitions, if adopted by a sufficient number of businesses, creates conditions for achieving economies of scale that favor productivity, with significant benefits likely to be passed on to consumers.

According to the estimate by the Budget Office, “regarding the fiscal field, although the positive impact of inflation on public revenues is diminishing, the significant increase in economic activity and the effectiveness of measures introducing digitization of payment methods into the overall economy and enhancing tax compliance (for this year, the Budget Office estimates that revenues from tax evasion amount to approximately €870 million) have created conditions for exceeding the target for a primary surplus of 2.1% of GDP in 2024. If this development occurs, it would be particularly positive as it allows for further de-escalation of the country’s public debt.”

The primary surplus for the current year is estimated at 3.5% of GDP, with the ongoing improvement attributed to increased tax revenues due to rising employment alongside wage and pension increases, a strong increase in tourism revenues—up by 5.6% compared to the same seven-month period in 2023—and a general increase in electronic transactions, partly resulting from the implementation of measures that include, among other things, linking cash registers to POS systems in businesses and expanding the obligation to accept payments by card.

Key Risks

On the other hand, the report identifies several risks that could hinder the growth trajectory of the Greek economy.

According to the head of the Budget Office, the main risks are:

• The extremely volatile international environment, which could pose significant risks from geopolitical tensions that may lead to a resurgence in supply chain costs.
• The structural problem faced by Europe as a whole with higher energy costs compared to its main trading partners, as highlighted by a recent report from Mario Draghi, is also reflected in the Greek industry with adverse consequences for competitiveness, investments, and inflation.
• Bureaucratic and administrative delays present obstacles to the rapid implementation of legislated reforms, making it difficult to attract foreign investments.
• The impact of natural disasters on the environment and productive fabric, with associated fiscal costs.

At the same time, Mr. Tsoukalas assessed that the new Medium-Term Fiscal Structural Plan of Greece serves as a guarantee of the fiscal stability and credibility that have been painstakingly built over the past years. It is in the interest of citizens to continue prudent and effective fiscal policy and to avoid policies that jeopardize fiscal stability, as a prerequisite for achieving long-term economic growth and improving the living standards of citizens.

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