The leftist Greek government is banking that its 2016 “tax tsunami” will successfully be extended into 2017 and generate an even higher primary budget surplus than the one proscribed in the draft budget.
As figures emerge for the ongoing and nearly concluded year, it appears that the primary budget surplus of 0.5 percent of GDP – the modest 2016 memorandum-mandated target – will also be exceeded.
The optimism, as far as meeting fiscal targets, comes from a projected increase in revenues from indirect taxes by 1.3 billion euros in 2017; an overall increase of 14.5 percent in the income tax rate; 1.2 billion euros in additional direct taxes that taxpayers will be called on to pay, and lastly, higher contributions to social security funds by wage-earners and the businesses that employ them.
While state coffers fill and fiscal targets are met, the reduction in households’ disposal incomes and the ever-shrinking liquidity and turnover in Greek markets bode ill for the “real economy”.
With figures collected to date, the primary budget surplus number, as a percentage of GDP, is now calculated as hovering at the 1.09-percent mark, double the 0.5-percent target.
For 2017, the government revised the primary budget surplus target to 2 percent of GDP, up from 1.75 percent agreed to with creditors.
Combined with the extremely ambitious forecast of a 2.7-percent GDP increase in 2017 – mostly shared by European creditors, the IMF and the government – and which translates into six billion euros, the higher primary budget surplus could mean more money going to service debts to institutional creditors.
The factors on which Athens and creditors base their bright forecasts for GDP growth is a boost in investment, resurgent private consumption (amid higher direct and indirect taxes), an increase in exports and a lowering of unemployment.
Of course, the finance ministry’s improved and optimistic forecasts are conditionally based on a series of variables, all of which are dutifully listed in the text submitted by the ministry to accompany the draft budget. Foremost is the provision for debt relief, considered by the finance ministry as crucial for 2017’s economic developments in the country – although the latter does not depend on Athens’ volition.
