Budget tabled amid growing uncertainty for 2023


The Finance Ministry tabled on Monday the final budget for 2023 which, despite the global challenges, sees the Greek economy growing next year and the budget turns into a primary surplus.

Meanwhile, consensus is building that the next couple of quarters will be challenging across the eurozone, leading to a modest growth rate for the economy after the strong rebound in the year following the pandemic and solid growth close to 6 pct this year.

The ministry marginally revised the growth rate to 1.8 pct, from 2.1 pct in the draft budget, with inflation also revised up to 5 pct, from 3 pct previously.

The global uncertainty is reflected in the budget in the more modest growth of private consumption and exports, by only 1 pct respectively.

Investments are seen picking up most of the momentum next year. They are expected to accelerate their growth to 15.5 pct in 2023, from 10 pct in 2022. This is considered rather ambitious by most observers, even with the benefits that come with the RRF, which has been progressing during 2022.

The debt load will continue its downward trajectory, largely benefiting from the rise of nominal GDP to 224.13 billion euros, with the debt-to-GDP ratio dropping below 160 pct in 2023, on a debt stock of 357 billion euros.

The OECD updated this week its economic outlook. It expects investments to rise next year by 2.7 pct in 2023, leading to an overall lower growth forecast for next year to 1.6 pct.

The Paris-based think-tank expects inflation at 4.3 pct for the harmonized and 4.8 pct for core inflation, suggesting that challenges for household disposable incomes will persist next year.

The Parliamentary Budget Office had a similar view regarding the budget. The PBO sees the global uncertainties, energy crisis and tight monetary policy framework could undermine both macro and fiscal assumptions, requiring corrective action on the fiscal front during next year.

In its autumn forecast, the European Commission also takes a more modest outlook, with growth seen at 1 pct next year and inflation at 6 pct, towards mounting challenges for households and firms, and uncertainty around the investment outlook.

There is a consensus among most observers that the cycle of the two years after the pandemic, which saw the most accommodative stance by central banks and sizable fiscal support by states, has ended and governments will face a tough task in 2023.

These implications affect other government objectives in Greece, like securing the investment grade for GGBs. Most research is now moving the prospect of investment grade towards the end of 2023, or even early 2024.

Although no political risk is seen in Greece as the baseline scenario sees the current administration staying in office and any political shift is not expected to result in major policy changes, the electoral cycle is factored in and compounds the global challenges and uncertainties.

The political landscape is further complicated by the recent revival of snap polls speculation for early next year due to a series of revelations related to the surveillance scandal that has raised tensions and has put the Mitsotakis administration under pressure.