Macro roundup: Budget buster
Things didn't quite go as the government planned
The Finance Ministry this week issued its final government budget execution bulletin for 2020, giving us the final picture of just how much the pandemic derailed its best-laid plans.
The primary budget deficit — which excludes debt interest payments — was 18.2 billion euros for the year, compared with a target when the budget was set for a surplus of 2.2 billion euros. The outcome represents a fiscal easing of 23.2 billion euros from 2019, when it came in at a surplus of 5 billion euros.
Overall central government spending jumped 27 percent last year, while revenue dropped 14 percent. Public Investment Budget expenditure, a conduit for much of the government’s support for private businesses, jumped to 10.6 billion euros from 5.6 billion euros in 2019.
Greek households’ disposable income surprisingly rose 1.6 percent year-on-year in the third quarter, after dropping 5.6 percent in the previous three months, according to Elstat data this week. Consumption dipped 0.3 percent after a 13.9 percent drop in the second quarter.
What’s interesting in the data is that it shows again how fiscal support has been critical in getting the economy through the pandemic. The table below, taken from the release, shows gross income fell 4 percent in quarter, but disposable income rose as households paid almost half as much tax as they did in the same period a year earlier.
Bank lending to the private sector increased at an annual 3.4 percent in December, the most since March 2010, before Greece’s first bailout from the euro area and International Monetary Fund.
From the same release, private sector deposits held in Greek banks increased for an 11th straight month. The 4.4 billion-euro increase in December is also the biggest single-month increase since before the bailout era, barring one month in December 2012, when a long-delayed bailout disbursement meant the government could start paying suppliers after a long liquidity squeeze.
Retail sales in November plunged by 7.9 percent from a year earlier as the country went back into lockdown with coronavirus cases rising. It’s the biggest decline since the 24.5 percent drop April, during the first lockdown. From Elstat:
Consumer confidence improved slightly for a second month in January, according to the latest data this week. Overall economic sentiment dipped, which is strange since each of the sectoral confidence indicators improved.
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Next week’s key data
January Purchasing Managers’ Index (IHS Markit)
December exports and imports of goods (Elstat)
Recovery fund reading
This week, Germany’s Friedrich-Ebert-Stiftung foundation published a report I co-authored with Nick Malkoutzis and Yiannis Mouzakis of MacroPolis on Greece’s recovery plan. How Greece uses the funds it receives from the EU’s Recovery and Resilience Facility will be one of the country’s major macroeconomic issues for years, so do follow this link, read the report and let me know your thoughts.
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