The draft state budget for the year 2025, which was tabled in Greece’s Parliament on Monday, forecasts GDP growth his year to reach 2.2% and rising to 2.3% next year, robust when compared to forecasts of 0.8% and 1.4%, respectively, for the Eurozone.
The latter forecasts emanate from the European Commission’s Spring economic forecast.
Investment in the country is forecast to increase by 6.7% in 2024 and 8.4% in 2025, while the unemployment rate is forecast to drop from 10.3% in 2024 to 9.7% next year. GDP in nominal terms next year is expected to increase by roughly 10 billion euros, while general government’s debt to GDP ratio is projected to decrease by 4.6 percentage points. The consumer price index is estimated at 2.7% this year, easing to 2.1% in 2025.
The draft budget is up for deliberation by members of a relevant standing Parliament committee before a vote is taken to send it to the floor for a full debate and a vote in a plenary session.
Tax breaks feature in draft
Among the highlights of the new budget, besides a 1% cut in social security contributions – 0.5 for employees, 0.5 for employers – is an abolition of an annual fee for self-employed professionals, which stood at 325 euros this year after being cut from 650 euros last year.
Another measure is a return of a special tax on fuel to farm professionals and three years of tax-free income from previously unused property, which aims to adds tens of thousands of apartments to the market in order to lessen a housing shortage in urban areas. Along these lines, the exemption of VAT for new constructions is extended and incentives are provided for corporate mergers and buyouts.
Besides the very prominent across-the-board increase in public sector wages, a higher subsidy will be granted to low-income college students studying at regional universities, from 1,500 euros to 2,000 euros, per year. A 20%-hike is escribed for night pay paid police, first responders and armed forces personnel, with the hourly rate tacked on to the normal salary increased to 3.33 euros from 2.77 euros.
A financial incentive has been budgeted to attract physicians to public health units in remote areas.
In a letter to the deputies comprising the committee, National Economy and Finance Minister Kostis Hatzidakis and Deputy Minister Thanos Petralias stated:
“The draft 2025 budget is submitted at the same time as the submission to the Council of the European Union and the European Commission of (Greece’s) first Medium-Term Fiscal-Structural Plan 2025-2028 (MTP), based on the new European economic governance framework. Therefore, the macroeconomic and fiscal figures reflected in the draft are in harmony with the estimates of the MTP.”
The announcement accompanying draft budget notes that over the last three years the global economy has faced successive crises due to inter-connected economic, climatic and geopolitical disturbances, as the Greek government states.
Despite signs of recovery, the international economic environment is characterized by increased uncertainty linked to recent geopolitical developments in the Middle East, the war in Ukraine as well as short-term factors, such as tighter monetary policies and the reduction of fiscal support internationally after the pandemic and the energy crisis, but also with the significant and accelerating effects of climate change.
In this adverse and uncertain international environment, the Greek economy is proving to be resilient, the ministers said.
