Shadows of war scenarios appear in yet another state budget.
The background this time is the conflict in the Middle East.
And the economic staff is preparing for the revision of oil and natural gas prices, on which the state’s revenues and expenditures are based.
The final figures of the state budget will be seen in Parliament on November 21, where the final plan with the changes is expected to be submitted.
The key is the course of the revenues for October, where the government’s room for fiscal maneuvers will also be seen.
Inflation is uncertain whether the state budget target for 2024 will be reached. The government estimates it will fall to 2.4% in 2024 from 4% this year.
This estimate, however, was made before the war in Israel with the assumption that the price of a barrel of crude oil will remain at 80 dollars, of natural gas at 40 euros per MWh and the exchange rate of the euro at 1. 1 to 1 with the dollar.
The ongoing crisis in the Middle East is causing a headache for the government over the level of spending in 2024, as it will also depend on fuel prices
An important factor is the evolution of the war in Israel, with benefits now strictly targeted at the vulnerable. Although inflation is easing, food price hikes continue, causing concern, especially when the war in Gaza is ongoing.
The rally in olive oil prices is also worrying the government as they approach 15 euros a kilo on supermarket shelves while the cost of a tin has climbed to around 180 euros from almost 100 euros last year. Apart from olive oil, the production of vegetables and fruits in Greece lagged this year in terms of quantity and quality due to unfavorable weather conditions. According to ELSTAT’s most recent data, the food category as a whole “ran” by 9.4% in September 2023 compared to a year ago, at the same time that inflation stood at 1.6%.
Changes in sizes
The figures announced by Eurostat for Greece show that inflation changed course and rose to 3.9%, increased compared to September which had closed at 2.4%. On the other hand, inflation in the eurozone fell to 2.9% in October from 4.3% in September, the lowest rate in two years.
According to the forecasts of the financial staff, net income increased from 62.1 billion euros last year to 65.2 billion euros, while GDP increased from 183 billion in 2019 to 224 billion GDP this year and next year with 235 billion GDP.
The growth rate is estimated to reach 2.3% this year. It should be noted that for the period January-September 2023 the amount of net revenues of the state budget amounted to 48,296 million euros, showing a small increase of 23 million euros compared to the target.
The keys to fiscal extra from 2024
They have sent a signal from the government that the extra money from the anti-evasion measures that will go into the state coffers will be shared in society.
The financial staff calculates that the new self-employed tax system brings in 874 million euros in revenue, while the final amount after the abolition of the pretense fee will be in the order of 606 million euros per year.
This amount, according to the government and executives, will be allocated to society, either through subsidies to those in need and to Education and Health. So their final direction is expected to be recorded in the state budget and final plan for 2024, which will be voted on near Christmas. The plan is expected to have some changes and there will be revisions, in terms of revenue, but also possibly in terms of inflation in 2024, due to the developments in the Middle East.
The great challenges and Thessaly
An indicator of the course of the economy is the exports of industry, which consistently constitute over 80% of Greek exports of goods (July 2023: 88%).
The figures show they fell in July by 5.6% year-on-year, while in August the country’s total exports of goods fell by 24.5%, with exports excluding petroleum products recording a milder decline of 14.3%. .
A study by Alpha Bank notes that, according to the European Commission’s recent forecasts, the GDP in the European Union is expected to grow by 0.8% in 2023 and by 1.4% in 2024, against previous forecasts of an increase of 1% and 1, 7%, respectively.
Especially for the German economy, the so-called “steam engine” of the Eurozone, the EU’s forecast is that it will be in recession this year, with its GDP shrinking by 0.4% year-on-year and recovering next year. year by 1.1%.
However, the challenges are significant for the Greek economy in 2024, as the general slowdown is compounded by the effects of climate change, which sent an emphatic warning signal with floods from storm Daniel affecting almost 20% of Thessaly – a region that covers 6% of Greek exports (with approximately €2 billion exports per year).
According to a study by the National Bank, the criticality of its contribution is mainly focused on its high (and continuously increasing) shares in agri-food and metal exports (14% and 8%, respectively) – which reach 44% for dairy and ⅓ for cotton.
We note that Thessaly produces approximately 20% of animal feed and milk, thus offering raw material to related agri-food industries in other regions.