Draft budget submitted in Greek Parliament

The budget has a worse-case case scenario dependent on the course of Covid-19

The Greek government submitted the draft state budget in Parliament for the 2021 fiscal year Monday, which is dependent on the course of the pandemic.

The baseline scenario for 2021 projects growth of 5.5% which may reach 7.5% if the resources of the Development Fund and the React EU arrive and are utilised (a total of 5.5 billion euros). In the negative scenario where the pandemic does not subside, either within 2020 or in the second quarter of 2021, the growth in the next year will be limited as a percentage of GDP between 4.5% – 5%. This year, a recession of 8.2% is expected, as had initially been estimated at the beginning of the pandemic.

The recovery projected for 2021 will be supported by measures to reduce the tax and insurance burden and to encourage the creation of new jobs, which are included in the 2021 budget from January 1st, 2021, the abolition of the solidarity levy on income from private economic activity and the possibility of recruitment without insurance contributions for six months and under minimum bureaucratic conditions, which has already started on 1 October 2020. The recovery is also facilitated by the extensive but prudent support measures of 2020, which have budgetary implications in 2021 as well.

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The 2021 budget maintains, for security reasons, the special Covid-19 reserve created in 2020, in an effort to meet extra-ordinary needs that may arise from both the health and financial pressures of the pandemic in the first months of 2021.

The primary deficit of the general government is forecast to amount to 6.23% of GDP (10,643 million euros) under the provisions of the EU’s Enhanced Supervision.

Inflation is estimated to move slightly upwards, in light of a spike in demand, to 0.6% compared to 2020, contributing to the increase in the real average wage by 0.9% on an annual basis.

Unemployment is projected at 16.5% of the workforce, an improvement of 2.1 percentage points compared to 2020, as the number of unemployed will decrease again in 2021 and the number of employed will increase, both self-employed and employees.