Greece hopes higher investments and lower taxes will help boost energy growth next year after the country recovers from a decade-long debt crisis.
The increase will reach at least 2.8% next year from 2% in 2019, according to a draft budget submitted to parliament by the Conservative government on Monday.
“The draft budget … signals the radical turnaround of rising economic policy, employment and rising incomes,” Deputy Finance Minister Thodoros Skylakakis said in an accompanying statement.
Unemployment is projected to drop to 15.6% next year from 17.4% in 2019, while Athens projects public debt will drop to 167.8% of GDP, or 331 billion euros, in 2020 from a projected 173.3% of GDP. this year.
Greece’s national debt and its unemployment rate are the highest in the euro area.
The country emerged from its third international bailout last year, and fiscal progress is still being monitored by its euro area lenders, who project that the economy will grow by 2.2% in 2020 – far less than projected –budget.
Greece has pledged to secure a primary budget surplus – which excludes debt service costs – of 3.5 per cent of GDP each year by 2022. Athens projects a 3.56 per cent GDP surplus next year , based on his draft budget of 2020.
As well as expanding the tax base, the Conservative government wants to cut taxes on businesses and increase social spending next year. The policies it plans are worth 1.2 billion euros, the budget said, and will help boost growth.
These plans are feasible as long as Athens “improves tax efficiency and rejoins public spending as promised,” economist Nikos Magginas told the National Bank.
If the planned measures are fully implemented, economic activity would accelerate, helping to bridge the gap with the European Commission’s forecast of 2.2% growth.
The government, which came to power in July, has said it wants agreements from official lenders to reduce the budget surplus target of 3.5% in 2021 and 2022.
Athens has exceeded its fiscal targets in recent years, with the former left-led government finding fiscal space to allocate additional funds to those most hit by the crisis.
“Reducing any high surplus (above the primary surplus) is a first step in our attempt to reduce the targets themselves, a condition for accelerating economic growth,” the draft budget reads.
Greece has built a buffer of more than 30 billion euros of unused loans and money raised from markets. It is now relying solely on the bond markets to refinance its debt after years in which it was unable to lend commercially, having completed three bond sales since emerging from the bailout files last year.
Under the draft budget, Athens plans to “ensure its continued presence in international bond markets” through the issuance of high-liquidity bonds./Investing.com
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