Growth of 2.3% this year, GDP growth of 3% for 2024, 3% for 2025 and 2.1% for 2026, the Ministry of Finance forecasts for the development of the Greek economy. At the same time, high primary budget surpluses are foreseen.
These key macroeconomic considerations are included in the Stability Program 2023-2026, submitted on Saturday to the European Commission, and according to which:
Inflation is expected to reach 4.5% in 2023 and decelerate to 2.4% in 2024 and 2% in 2025 and 2026.
Unemployment is expected to reach 11.8% in 2023 and decline to 10.9% in 2024, 10% in 2025 and 9.8% in 2026.
The strengthening of investments is expected to be particularly important, with an annual increase of 13.2% in 2023, 9.7% in 2024, 10.7% in 2025 and 7.2% in 2026. An important role in the strengthening of investments is expected to roll out the Recovery and Resilience Fund, with public investment estimated at 1.7% of GDP in 2023, in 1.9% of GDP in 2024, to 1.8% of GDP in 2025 and to 1.7% of GDP in 2026.
The Stability Program includes all the measures that have been instituted from the beginning of 2023 until today, such as the permanent reduction of insurance contributions by 3 units, the permanent abolition of the solidarity contribution in the private and public sector, the extension of the VAT reduction in the focus , transport and a range of goods and services, the increase in disability benefits and disability pensions, the abolition of the 1% levy for TPDY, the reform of the salary of NHS doctors, the regulation of salary issues of the Armed Forces, the reform of the heavy and unhealthy, the increase of the student allowance, the extension of the maternity allowance of employees from 6 to 9 months, the extension of the exemption of the VAT on new buildings, the aid of 200 to 300 euros for pensioners who did not receive an increase due to personal difference, as well as the increase of the minimum wage to 780 euros and the consequent increase in unemployment benefits.
In addition, the implemented measures to deal with the energy crisis are included, amounting to 4.8% of GDP for 2022 and an estimated amount of 1.2% of GDP for 2023, as well as the increase in the regular subsidy of hospitals from 1.68 billion. EUR in 2023 to EUR 1.75 billion in 2024.
In addition, the Stability Program includes in the base scenario the cost of increasing pensions each year based on GDP and inflation, as well as the announced by the TIF, the increase in the salaries of civil servants from 1/1/2024.
Based on the above – and under the condition of stable policies – the primary result of the General Government is predicted to be a surplus of 1.1% of GDP for 2023, to 2.1% of GDP in 2024, to 2.3% of GDP in 2025 and to 2.5% of GDP in 2026.
According to the finance ministry, as the country is in a pre-election period, any additional pre-election measures that have been announced are not included, while the target of 0.7% of GDP primary surplus for 2023 remains.
The ministry reminds that the current government has announced, in addition to the increases in pensions and salaries of civil servants included in the above result, additional fiscal measures amounting to 0.1% of GDP for 2024 and 0.3% of GDP for the years 2025 and 2026. As is the increase in the tax-free allowance by 1,000 euros for families with children, the reduction of presumptions living wage, the increase of the minimum guaranteed income by 8%, the gradual abolition of the employment tax, the gradual reduction by an additional 1% of insurance contributions, the increase of the maternity allowance for freelancers and farmers from 4 to 9 months to the level of the minimum wage, a new permanent scheme of 10,000 new jobs for young people and a range of other initiatives. The implementation of the above measures does not disturb the medium-term target for a primary surplus in the region of 2%.
Finally, a key element of the Stability Program is the rapid de-escalation of the General Government debt, which, with stable policies, is expected to decrease from 171.3% of GDP in 2022 to 162.6% of GDP in 2023, to 150.8 % of GDP in 2024, to 142.6% of GDP in 2025 and to 135.2% of GDP in 2026.
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**Interview with Dr. Maria Kostas, Economist and Senior Researcher at the Greek Economic Observatory**
**Editor:** Thank you for joining us today, Dr. Kostas. The Greek Ministry of Finance has recently released its Stability Program for 2023-2026, forecasting a steady economic recovery. Can you share your thoughts on the projected GDP growth rates of 2.3% for 2023 and 3% for 2024?
**Dr. Kostas:** Thank you for having me. The projected growth rates are encouraging, especially considering the challenges Greece has faced in recent years. A rise to 3% in 2024 suggests a rebounding economy, likely driven by increased investments and fiscal policies aimed at maintaining high primary budget surpluses. This indicates a commitment to fiscal discipline and sustainable growth.
**Editor:** Speaking of investments, the program anticipates a significant annual increase in investments, particularly supported by the Recovery and Resilience Fund. How critical is this funding for Greece’s economic trajectory?
**Dr. Kostas:** The Recovery and Resilience Fund is crucial. With an expected annual investment growth of around 13.2% in 2023, these funds will help rejuvenate various sectors, create jobs, and ultimately bolster economic growth. This influx of public investment, estimated at around 1.7% of GDP in the coming year, will underpin many reforms necessary for Greece’s long-term economic stability.
**Editor:** The Stability Program also outlines measures to combat inflation, which is expected to peak at 4.5% in 2023. In your view, will the anticipated decline in inflation help businesses and consumers?
**Dr. Kostas:** Absolutely. A decline in inflation to 2.4% by 2024 will provide much-needed relief for both businesses and consumers. With rising prices having an adverse impact on purchasing power and operating costs, a decrease will likely stimulate consumer spending and create a more favorable environment for investment.
**Editor:** The projected decline in unemployment from 11.8% in 2023 to 9.8% in 2026 is notable. What factors do you believe will contribute to this downward trend?
**Dr. Kostas:** The combination of increased public and private investments, job creation initiatives, and the initial effects of structural reforms will significantly contribute to lower unemployment rates. Measures such as the increase in minimum wage and the investment in social benefits, like enhanced maternity leave and disability pensions, also support the job market by improving the overall quality of life for workers.
**Editor:** Lastly, with the new measures aimed at addressing the energy crisis, how significant are they in terms of economic and social support?
**Dr. Kostas:** The measures addressing the energy crisis, amounting to significant percentages of GDP, are key not only for economic stability but also for social welfare. By subsidizing energy costs and facilitating improvements in hospital funding, the government is addressing immediate needs without neglecting long-term investments in infrastructure and social services. This multi-faceted approach will help Greece navigate its recovery from the pandemic and beyond.
**Editor:** Thank you, Dr. Kostas, for your insights on the Stability Program and its implications for the Greek economy.
**Dr. Kostas:** My pleasure! It’s an important time for the Greek economy, and these developments will be critical in shaping its future.
