Growth of 2.5% this year, close to the estimates of the government (2.9%), the Hellenic Statistical Authority and international organizations is predicted by the State Budget Office of the Parliament, which also “sees” inflation running at a rate of 2.9%. However, the Office’s remark that salary increases should not exceed the capabilities of the Greek economy also raises concerns.
According to the report of the Budget Office for the fourth quarter of 2023, a decisive factor for achieving a high growth rate is the acceleration of investment and the allocation of resources from the Recovery Fund – grants and loans – amounting to 3.6 billion euros planned for 2024. Therefore, alternative scenarios are presented, predicting the following:
– If 50% of the resources of the Recovery Fund are absorbed by the real economy, the annual GDP growth rate for 2024 will be 2.7%.
– If the absorption rate reaches 75% of the total, the annual GDP growth rate increases to 2.9%, which is the forecast included in the 2024 Budget.
– With full allocation of the resources of the Recovery Fund to the real economy, the annual GDP growth rate is set at 3.2%.
According to the Office’s estimation, the target for a primary surplus of 2.1% of GDP in 2024 is achievable, provided there are no extraordinary fiscal interventions and the budget goals are strictly adhered to. In 2023, the primary surplus amounted to 3.62 billion euros (1.8% of GDP), significantly exceeding the latest estimate of the primary surplus reflected in the 2024 Budget Proposal, which was 2.55 billion euros.
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The improvement is attributed to increased tax revenues (both direct and indirect taxes) due to rising employment along with simultaneous increases in wages and pensions, better performance in tourism revenues, which increased by approximately 15.7% compared to the same period in 2022, overall growth in electronic transactions, and finally, inflationary pressures.
The Office considers that excessive increases in nominal wages require significant attention. Specifically, wage increases should be commensurate with the economy’s capabilities to avoid undermining its competitiveness.
As emphasized, the recent 6.4% increase in the minimum wage is marginally within the economy’s capabilities if it does not surpass them. This will depend on whether the economy achieves a robust growth rate in 2024. Otherwise, there is a real risk of hindering the de-escalation of inflation.
