A draft of Greece’s 2017 state budget must be tabled in Parliament by Oct. 3, although finance ministry officials are still pouring over fluid revenue figures for the ongoing year, given that a failure to meet targets could trigger activation of a dreaded spending cuts mechanism next spring.
Looking into the near future, and specifically next year, the leftist Greek government is facing increased risks due to what analysts call “conflicting assumptions”.
For instance, the government – and European creditors – is projecting a 2.7-percent growth rate in GDP for 2017, although the first half of 2016 ended in recession and with few positive economic indicators on the horizon as of August 2016.
In terms of numbers, the government estimates that GDP will increase by six billion euros, in current rates and in comparison to the current year, i.e. 181 billion euros. This year’s GDP is expected to reach 175 billion euros, assuming that even a marginal growth rate returns to the crisis-battered Greek economy in the second half of the year.
Tax revenues are projected to reach 47 to 48 billion euros for 2017, an increase of 2.5 billion euros in comparison to 2016 – and assuming that the increase in 2016’s revenues actually meets targets. The year’s goal calls for 44.766 billion euros in tax revenues, with roughly 50 percent of that goal already collected.
A primary budget surplus, as a percentage of GDP, must reach a modest 0.5-percent for the ongoing year; increasing 1.75 percent in 2017 and then a very ambitious 3.2 billion euros in 2018.
This year’s tax hikes translate, at least on paper, to 4.3 billion euros for 2017, of which 1.4 billion euros are budgeted to come from increases in social security contributions; 1.4 billion euros from higher income tax rates and 1.5 billion euros from a rise in a variety of indirect taxes, primarily VAT rates and surcharges on fuels.
