IOBE: Growth won’t make tar­get

Re­port warns of im­pact from re­view de­lay, in­creased taxes and con­tri­bu­tions, and reg­u­la­tory changes

Kathimerini English - - Focus -

The de­lay in the com­ple­tion of Greece’s sec­ond bailout re­view will in­flict a blow on eco­nomic growth this year, which will un­der­per­form the gov­ern­ment’s ex­pec­ta­tions, the Foun­da­tion for Eco­nomic and In­dus­trial Re­search (IOBE) ar­gues in its quar­terly re­port re­leased yes­ter­day.

IOBE an­a­lysts note that the eco­nomic re­bound in 2017 will range be­tween 1.5 and 1.8 per­cent, which is smaller than the tar­get set in the bud­get. They also es­ti­mate that un­less the re­view is com­pleted by spring, that pos­si­ble growth rate of 1.8 per­cent will no longer be at­tain­able.

The foun­da­tion be­lieves that the bud­get tar­get of 2.7 per­cent ex­pan­sion will not be achieved due to the de­lay in en­ter­ing the Euro­pean Cen­tral Bank’s quan­ti­ta­tive eas­ing (QE) pro­gram, in­creased im­ports and the de­lay in the re­view’s com­ple­tion.

For 2017, IOBE says the main fac­tor af­fect­ing the Greek econ­omy – quite pos­si­ble to a greater ex­tent than in 2016 – is the new fis­cal mea­sures. The in­crease in ex­ist­ing taxes, such as the spe­cial con­sump­tion tax on oil, au­to­gas and tobacco, and the im­po­si­tion of new ones (on land­line tele­phone ser­vices, cof­fee im­ports etc) since the start of the year will fur­ther re­duced house­holds’ dis­pos­able in­comes.

The strong­est pres­sure from the fis­cal mea­sures will fall on the in­come of free­lance work­ers and farm­ers, due to changes in the cal­cu­la­tion of so­cial se­cu­rity con­tri­bu­tions. The months of un­cer­tainty over its ap­pli­ca­tion has re­sulted in in­creas­ing un­rest among free­lance work­ers since the last quar­ter of 2016, lead­ing to many of them clos­ing their books.

IOBE fur­ther ex­pects the new mea­sures to af­fect the in­vest­ment cli­mate as “in­vestors are in­ter­est- 1.0700 ed in business con­di­tions. Con­stant changes in cor­po­rate taxation in the last cou­ple of years, changes to so­cial se­cu­rity con­tri­bu­tions and the sense of reg­u­la­tory in­sta­bil­ity in Greece are fac­tors that dis­suade in­vestors from tak­ing risks.”

The re­port also warns that the bud­get tar­get for ad­di­tional rev­enues from the new hikes in fuel and tobacco taxation are par­tic­u­larly op­ti­mistic.

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