The Ministry of Finance revised its forecast for 2024 to the most conservative target in relation to the Budget, as the consequences of the policies followed by the ECB and the developments in the European economy, affect to a greater extent the investments and therefore, the growth .
As for the stability program, where the readjustment of the growth objective of the Greek economy was submitted, it incorporates support measures of 2.4 euros per two years, which have already been announced, as well as an increase in the public investment program by 360 million euros.
It predicts a primary surplus of 2.1% of GDP this year and next and a de-escalation of average inflation to 2.6% in 2024.
In more detail, what is foreseen:
A. Primary surpluses of 2.1% in 2024 and 2025 and significant deleveraging
The Stability Program foresees a primary surplus of 2.1% of GDP in the years 2024 and 2025. On this basis, a significant de-escalation of the debt-to-GDP ratio is recorded from 172.7% in 2022 and 161.9% in 2023, to 152 .7% in 2024 and 146.3% in 2025, giving a positive signal to markets and rating agencies.
The projected reduction of Greek public debt in the coming years is a continuation of a record reduction in the period 2021-2023, when the ratio of public debt to GDP fell by 45 percentage points (from 207% of GDP in 2020 to 161.9% in 2023). . This reduction is by far the fastest reduction of public debt ever recorded in Europe.
B. Social policy interventions of €2.4 billion – New increase of the Public Investment Program by €360 million
It includes all the actions of more than 1.5 billion euros implemented in 2024 as well as the interventions for 2025 amounting to 880 million for which the government has committed. In particular, they include:
1. All measures foreseen in the 2024 Budget and already being implemented, which exceed 1.3 billion euros in cost:
The increase in the salary of civil servants with an estimated annual cost of 930 million euros on a gross basis or 600 million euros net.
The tax-free increase of 1,000 euros for families with children at a cost of 135 million euros.
The increase of the minimum guaranteed income at a cost of 43 million euros.
The extension and increase of the maternity allowance for farmers and freelancers, at a cost of 37 million euros.
The increase in pensions by 3% with an estimated cost of 455 million euros and an additional 56 million for small government pensions.
2. New measures implemented from 2024 at a cost of 217 million euros, in addition to those foreseen in the Budget:
The increase in the birth allowance at a cost of 90 million euros.
The increase in the compensation of on-call doctors at a cost of 45 million euros.
The return of the EFK to agricultural oil, at a cost of 82 million euros.
3. New increase of the National Public Investment Program from 2024 by 360 million euros (from 2.05 billion euros to 2.41 billion euros) in order to finance the investment projects, but also the restoration of Thessaly.
4. All the measures that the Government has announced for implementation from 2025, in full alignment with the pre-election Program:
A 0.5% reduction in insurance contributions at a cost of 225 million euros.
Abolition of the pretension fee at a cost of 120 million euros.
Permanentization of the return of the tax on agricultural oil with a new method, with an estimated cost of around 100 million euros.
Extension of the suspension of VAT on new buildings at a cost of 20 million euros.
Increase of the student housing allowance at a cost of 15 million euros.
The implementation of the additional measures in relation to the Budget is based on the better course of revenues observed in the last quarter of 2023 and the first months of 2024. On this basis the primary result of 2023 amounted to 1.86% of GDP against a target of 1.15% of GDP that was included in the Indicative Budget Report, which creates a better starting point for achieving the 2024 fiscal targets.
This positive result proves the dynamics of the Greek Economy, but also the gradual benefits from the reduction of tax evasion and the improvement of tax awareness. It is indicative that in the first quarter of 2024, 451 million euros out of the 598 million euros that was the excess of tax revenue targets, came from the payment of corporate income tax.
C. Significantly higher growth rates compared to the Eurozone – further increase in investment
The growth rate of the Greek Economy, taking into account international developments, is estimated at 2.5% for the current year and 2.6% for 2025.
The revision to a more conservative target compared to the Budget (from 2.9% to 2.5%) is based on the slowdown in the European economy and the prolonged restrictive monetary policy of the ECB, which appears to be affecting investment more adversely than expected at the European level.
In this context, the European Commission in its winter forecasts in February 2024 revised in relation to its autumn forecasts (of November 2023), the growth rate in the Eurozone to 0.8% from 1.2%, while the IMF (World Economic outlook ) in its latest forecasts in April 2024 predicts a zero investment growth rate in the Eurozone (0.1%, while in the corresponding forecast of October 2023 it was 0.6%).
However, the forecasts show that compared to the rest of Europe, Greece continues to be in the leading positions in terms of growth rate (2.5% for 2024 and 2.6% for 2025) and investment growth (9.1 % for 2024 and 14.4% for 2025). Compared to the average growth rate of the Eurozone, the Greek economy, after growing at a fourfold rate in 2023 (2% versus 0.5%), is expected to grow at a threefold rate in 2024 (2.5% versus 0.8%) and at a significantly higher rate in 2025 (2.6% vs. 1.5%).
D. Greater than expected strengthening of citizens’ income – Faster de-escalation of inflation compared to the Eurozone
Taking into account the increase in the minimum wage, the “unfreezing” of the three years and the developments in the labor market, the wages of dependent labor in our country are expected to increase by 4.6% in 2024 against the 3.7% foreseen in the Draft Budgetary Plan submitted to the committee in October 2023.
With reference to inflation, in 2023 it rose, based on the harmonized index of consumer prices, to 4.2% compared to 5.4% of the Eurozone average. In 2024 it is expected to be 2.6% compared to 2.7% of the Eurozone average and in 2025 to 2% which is the objective of the monetary policy, compared to 2.2% of the Eurozone average.
The above indicates that Greece is growing clearly faster than the Eurozone average, closing the gap in terms of purchasing power. Cumulatively in the three years 2023-2025, the cumulative growth in Greece is expected to be 7.3%, compared to only 2.8% in the Eurozone, while the harmonized consumer price index is expected to have increased cumulatively by 1.6% less than the average of the Eurozone.
E. The change of the country’s production model continues
Forecasts suggest that, in relation to the rest of Europe, Greece will continue to be in the first positions in terms of growth rate and investment growth. And with the revised forecasts, an increased growth rate of both GDP and investments is expected in 2024 compared to 2023, while relative to the Eurozone average, the relative differences remain at similar levels. Thus, the process of convergence of the Greek economy towards the European average is expected to continue, as it is ongoing from 2019 onwards. It is recalled that in 2023 Greece recorded the highest performance among the 27 countries of the European Union in terms of per capita income growth.
Over the next two years, it is also predicted that the country’s production model will continue to change, which is reflected in a series of economic indicators. Specifically, it is observed:
20-year record in foreign direct investment: The last two years have seen record foreign direct investment of the last 20 years. In the period 2019-2023, 24.9 billion euros were invested in Greece by foreigners. In the same period, 8.1 billion euros were invested abroad by Greeks. The inflow-outflow balance of direct investment has been positive for each of the last five years and cumulatively amounts to a surplus of €16.9 billion. That is, in the last five years Greece has already attracted by itself an amount almost equal to the grants it receives under the RRF.
Gradual but obvious re-industrialization of the country. In the last five years the sizes of the Greek industry have increased spectacularly. Indicatively, the index of industrial production (ELSTAT) in the period 2019-2023 increased by 13% in real terms, the share of manufacturing in total foreign direct investment more than doubled from 7.5% in 2019 to 16.9% in 2023 and its share industry’s share of GDP increased to 14% in 2023, up from 12% in 2019. In addition, productivity in industry over the same period improved by 18%. All these figures are at twenty-year highs.
Changing the country’s export mix. In the last four years (from 2020 onwards), and despite the spectacular increase in tourism revenues, Greece exports more goods than services. Specifically, exports of goods increased from 33.1 billion. in 2019 to 49.8 billion in 2023 while services (tourism etc.) increased from 40.4 billion to 48.9 billion In particular, we should not dwell on the large increase in exports of high-tech products, which has more than doubled in recent years. The total size of exports has registered a large increase, from 73.5 billion. in 2019 to 98.8 billion, in 2023.
Significant improvement of the business environment. According to relevant international measurements, such as that of the Economist Intelligence Unit, Greece is the country with the greatest improvement in its business environment in the period 2019-2023, but also in the IMD ranking, according to which in relation to 2019 in 2023 Greece has improved its ranking by 9 places.
Continuous reduction of tax evasion, as shown by the increase in electronic transactions, the steady reduction of the VAT gap and as reflected by recent relevant studies, such as that of the IMF. Specifically, the VAT gap was 23.9% in 2019, in 2021 it rose to 17.8% and the goal is to reduce it to 9% by 2027 with the further expansion of electronic transactions and the implementation of interventions for tax evasion.
The behavior of the markets and investors, which is reflected among others: in the – record increase in the volume of investments in Greece by 41% in the last five years, the very high demand for Greek bonds (it is indicative that the recent issuance of the 10-year and 30-year bond were oversubscribed more than 5 and 11 times respectively), the great success of the recent disinvestment transactions of the Financial Stability Fund and the placement of large capitals in Greek investments both inside and outside the capital markets (e.g. the last recent privatizations and the very successful recent sale of TAIPED’s share in Athens International Airport where the strong investment interest exceeded the offer by 12 times, raising the total revenue of the State to 785 million euros).
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