Growth to fuel rise in revenues
Budget provides for 2.9 pct GDP expansion and 3 pct primary surplus despite social security conundrum
Finance Minister Gikas Hardouvelis yesterday tabled in Parliament the final draft of the 2015 budget which is in line with the targets of the country’s bailout agreement with its creditors and will be put to a vote on December 7, one day before the crucial Eurogroup meeting.
Despite the differing views of the troika, comprising the inspectors of the European Central Bank, the European Commission and the International Monetary Fund, the government has stuck to its position and is expecting a primary surplus of 3 percent of gross domestic product for next year, leading to a fully balanced budget for the first time in the country’s postwar history. However the biggest obstacle in the budget’s execution is the social security system hole, estimat- ed at 1.2 billion euros.
The main factor in attaining the primary surplus target will be a 1.4billion-euro increase in tax revenues through the significant improvement expected in economic activity. The Finance Ministry argues that the economy will expand by 2.9 percent next year, while Alternate Minister Christos Staikouras reiterated yesterday that the target for 0.6 percent growth, “if not conservative, is at least realis- tic.” He went on to stress that in order for that not to happen, the current quarter would have to post a 0.8 percent contraction, which appears highly unlikely, while ministry officials say that that way, the target for 2015 is also very much attainable.
Budget provisions include: unemployment dropping to 22.6 percent, from 24.8 percent this year and 254.5 percent in 2013; inflation reverting to positive territory (0.3 percent) from a negative 1 percent this year; private consumption growing 1.6 percent from just 0.2 percent this year and a 2 percent contraction in 2013; primary expenditure expanding by 456 million euros; and the national debt falling to 316.9 billion euros, or 171 percent of GDP, from 174 percent this year.
The ministry also expects to issue seven- and 10-year bonds next year.