The draft budget is being submitted today: What it provides for

Today, Monday, the draft budget for 2023 will be submitted to Parliament, the main features of which will be the forecast for achieving a primary surplus, albeit marginal, as well as continued growth despite the unfavorable climate that has been created in Europe.

The main goal of the Ministry of Finance will be to send a message of fiscal stability in all directions. According to sources from the ministry, a crucial factor for 2023 is to convince the markets that the country will protect at all costs what has been built with hard work and sacrifice over the past years.

Moreover, one of the government's key objectives for 2023 is to obtain investment grade status, a goal that is becoming increasingly valuable at a time when bond yields in the Eurozone are breaking one record after another.

As indicated by recent statements made by Finance Minister Christos Staikouras, growth for 2022 will be 5.31% of GDP, up from 3.11% of GDP, which was the budget forecast, and 3.11% of GDP, which is the expected European average.

For 2023, economic growth will be 2.11% compared to the European average of 0.91%.

As regards the final outcome, a primary surplus is expected to be generated, but at lower levels than those projected in the medium term. According to the latest information, the primary surplus will range from 0.51% of GDP to 0.71% of GDP and, in any case, will be lower than 1.1% of GDP.

It should be noted that, based on the medium-term plan, there was a commitment to achieve a surplus of 2% of GDP. However, changing circumstances and the continuation and even intensification of the energy crisis prompted the government to change its plans, as more money is now needed for economic and social support packages.

As for the primary deficit in 2022, it will ultimately be around 2%, which was the initial target.

With regard to inflation, the estimate included in the draft will be that this year it will average 9%, higher than initial forecasts, while for 2023 the forecast is more optimistic, stating that it will decline to 3% on average.

The draft will also include measures relating to 2023, which were announced by Prime Minister Kyriakos Mitsotakis at the Thessaloniki International Fair. It should be noted that the total amount of interventions for 2023 is estimated at €3.2 billion.

The main ones are:

-The abolition of the solidarity contribution for all income earned from January 1, 2023. This measure is estimated to increase the disposable income of 1.2 million private sector employees—it was also in effect last year— 500,000 civil servants, and 1,000,000 pensioners. The total fiscal cost is €1.24 billion.

-Increase in main pensions. The increase affects 1.5 million pensioners with low or zero personal differences. The amount of the increase will be 50% from GDP growth and 50% from the change in the Consumer Price Index. In the first year of implementation, the increase is estimated to be in the order of 7%. The cost is expected to exceed €600 million for 2023.

-The exemption from the obligation to pay business tax for farmers under the normal regime and coastal fishermen is extended to the 2022 tax year.

-For the tax year 2022 and onwards, natural persons engaged in business activities and legal persons, legal entities that increase, in relation to the previous tax year, the total working time of their employees with a full-time employment relationship in a year, for a period of at least three months within the year, provided that their gross income does not exceed €2 million in the tax year for which the exemption is granted. This measure will apply from September 1, 2022, and concerns 900,000 professionals and businesses.

-Extension of reduced VAT on transport, coffee, non-alcoholic beverages, gyms, dance schools, cinemas, and tourist packages until June 2023. The cost amounts to €246 million.

Thanasis Papadis