Budget expects big rebound in 2021

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The government expects the economy to bounce back by up to 7.5 percent in 2021 after an 8.2 percent contraction this year, per the first draft of the next year’s state budget tabled in Parliament on Monday.

The draft said the Greek economy will rebound by 5.5% in 2021 and if the promised resources from the Next Generation EU fund start arriving from the European Union the country’s gross domestic product will expand 7.5%.

“The dynamic recovery forecast for 2021 is also facilitated by the measures reducing the tax and social security burden and encouraging the creation of jobs, included in the budget,” Finance Minister Christos Staikouras stated in the draft’s foreword.

Private sector salary workers, freelance professionals, the self-employed, landlords and corporations will be better off by a total of almost 1.47 billion euros next year, as the draft incorporates the temporary tax breaks announced, such as the suspension of the solidarity levy, the reduction of the social security contributions by three percentage points and the scaled-down value-added tax for the first four months of the year in the sectors of transport, coffee, cinemas and tourism services.

Tax revenues are going to be higher by €4.95 billion compared to the provisions for the 2020 budget. Indirect taxes (VAT and consumption taxes) will be increased by €3.537 billion compared to estimates for 2020 to reach €27.472 billion.

Unemployment is projected to slide to 16.5% from 18.6% this year, while private consumption will advance by 5.8% compared to 2020. The 2021 budget will have a primary deficit of 1.01% of GDP.

“The 2021 state budget is being drafted, unfortunately, under odd and extremely adverse conditions and in a state of serious uncertainty,” commented Staikouras, with the budget’s baseline scenario being based on the assumption the pandemic will recede next year.

The Hellenic Fiscal Council, an independent body which advises the Greek government, said yesterday the targets set in the 2021 draft budget are optimistic but can be attained “provided the conditions required are fulfilled.”

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