This forecast, as clarified in the report (for the fourth quarter of
2020) published by the head of the Office, Frangiskos Koutentakis, "is
subject to a significant degree of uncertainty, which comes both from
the evolution of the pandemic and the restrictive measures and from
possible budgetary interventions and the utilization of the resources of
the Recovery Fund ". At the same time, people close to the Fund
forecast a 7% recession in the first quarter of the year due to pandemic
developments that led to the extension of the restrictive measures. The
recession is estimated to turn into growth from the second quarter of
the year onwards.
In addition, however, to its baseline scenario, the Budget Office cites
two more on the basis of the possibility of an additional budget
intervention of 5 billion euros that can be directed either to transfers
or to public consumption. "In the first case the growth rate of 2021
increases by about one percentage point and stands at 3.65%, while in
the second case the increase in the growth rate exceeds two percentage
points and becomes 4.84%," the report estimates.
The report notes that, despite the adverse economic and fiscal
developments, the international creditworthiness of the Greek State
remains strong, as evidenced by the recent issuance of a 30-year
government bond with favorable financing terms and increased interest
from international investors. It is also estimated that a possible
acceleration of vaccinations and a gradual easing of restrictions and
travel by summer could make a positive contribution to economic
activity, mainly through tourism.
Referring to the budgetary situation and the facilities that exist in
the exercise of fiscal policy, the authors of the report warn that they
do not justify any kind of complacency. "The debt that accumulates
during the pandemic will remain there after its end and its service will
put pressure on the state budget, especially after the lifting of the
extraordinary measures of mass purchases of ECB government bonds
(through the PEPP program", they emphasize characteristically.
According to the main conclusions of the report:
In 2020, the Greek economy recorded an annual recession of 8.2%,
compared to 6.6% in all Eurozone countries. The recession was mainly due
to the sharp decline in Exports of Services (-43%) and Private
Consumption (-5.2%). At the same time, the Current Trading Balance
recorded a serious deterioration of 8.4 billion (5.2% of GDP) compared
to 2019, while inflation remains negative in the region of -2%.
Unemployment remains stable due to special job retention measures and
workforce reductions.
In public finances, the deterioration recorded in 2020 compared to 2019
reaches 20.4 billion, forming a primary deficit of almost 14 billion
euros (8.4% of GDP). We estimate that the official budget result will be
better due to the special way of recording the emergency measures and
especially the tax suspensions and the repayable advance, as the amounts
that are expected to be reimbursed in the future will not be included
in the budget result. General Government debt increased by about 10
billion to 341 billion (205% of GDP) in December 2020.
This deterioration is mainly due to the extraordinary fiscal measures of
about 14.8 billion (excluding guarantees) carried out in 2020 to
address the pandemic as well as the significant reduction in GDP due to
the decline in economic activity. Despite the unfavorable economic and
fiscal developments, the international creditworthiness of the Greek
State remains strong, as evidenced by the recent issuance of a 30-year
government bond with favorable financing terms and increased interest
from international investors.
With these data, the forecast of the Budget Office for the growth rate
of 2021 is 2.7%. This forecast is subject to a significant degree of
uncertainty, which stems both from the evolution of the pandemic itself
and the restrictive measures as well as from possible budgetary
interventions and the utilization of the resources of the Recovery Fund.
The maintenance of restrictive measures for the entire first quarter of
2021 and the problems in the vaccination program at European level are
the most important risk for the development of economic activity this
year. On the other hand, a possible acceleration of vaccinations and a
gradual easing of restrictions and travel by summer can make a positive
contribution to economic activity, mainly through tourism.
With regard to fiscal interventions, maintaining the "general escape
clause" of the Stability Pact for 2021 and 2022 offers considerable
flexibility in the conduct of fiscal policy. This means that the
expansion measures that continue in 2021, amounting to about 10 billion,
will not cause short-term problems. In addition, the resources of the
Recovery and Resilience Fund can make an equally significant
contribution to short- and medium-term growth, without a large budgetary
burden. We note, however, that a condition for these resources to
contribute to the rates of economic growth is to increase public and
private investment above their current levels, which is a major
challenge for our country. Especially for public investment, it would be
important to strengthen the public health system in terms of logistics
and human resources.
The above data form a less restrictive institutional framework for the
conduct of fiscal policy, which should be used in order to accelerate
the recovery of the economy. However, it should be noted that the above
interventions at national and European level do not create real
budgetary margins. As we have said before, the facilities offered for
the short-term management of the crisis do not justify any kind of
fiscal complacency. The debt that accumulates during the pandemic will
remain there after its end and its servicing will put pressure on the
state budget, especially after the extraordinary measures of mass
purchases of ECB government bonds (through the PEPP program) are lifted.
Finally, it is worth noting the risk from the increase in private debt
that is expected to arise due to the economic downturn. The
non-performing private debt at the end of 2020 reached 242.6 billion
(108.1 billion in the tax office, 37.5 billion in the insurance funds,
58.1 billion in the banks and 38.9 billion in the domestic companies
Loan and Credit Receivables Management (EDADP): The total size is not
increased compared to 2019, however we expect to record a significant
deterioration when the implementation of repayments begins.At this stage
may require additional interventions and special repayment arrangements
"They are essentially tantamount to taking on part of the private debt
from the public sector. Such interventions for the whole of society
should have transparent rules and criteria and be decided at European
level.
