Macro roundup: Return of the wrap
The weekly review of Greece's macroeconomic data is back, and interested in the budget
Greece’s finance ministry this week released final figures for the 2022 central government budget execution. The big jump in revenue last year and the elevated level of spending are both aspects of the data that stand out.
During the first year of the pandemic, the country’s primary budget balance, which had been in surplus in 2019, swung to a 18.2 billion-euro deficit the following year as revenue collapsed and a raft of emergency measures swelled expenditure. Last year, the primary deficit narrowed to 6.7 billion euros, from 14.9 billion euros in 2021.
At 59.6 billion euros, revenue last year was way higher than it was before the pandemic. This was due to a surge in tax receipts, which came in 5.2 billion euros higher than forecast in the 2022 budget.
Spending by contrast, has remained even higher than it was in 2020, and the government’s strategy for getting the primary budget back into surplus — something it is under pressure from European officials to do — hinges on revenues continuing to rise up to meet spending, rather than decreasing expenditure.
This is to be expected and a result of the inflation that we’ve seen this year.
However, one more facet of the data jumps out strongly, and this is the large extent to which the growth in expenditure took place in the last month of the year. December is a month that government expenditure is always seasonally high, but the 12.2 billion euros of spending last month is more than a third higher than a year earlier.
In fact, throughout the year until November, cumulative spending was either lower or closely tracked the targets set in the 2022 budget. Then December’s spending blew the year’s total to 3.4 billion euros above the target for the year.
This wasn’t a case of the budget getting blown off course. As the government has spent money on various policies aimed at ameliorating the impact of rising prices on Greek households, it has insisted that it has just been using the budget space created by increasing revenue. By the end of the year the 2022 budget targets had been superseded in the 2023 budget, and set against the newer yardstick, the final expenditure figure for the year was actually less than forecast.
The backdrop to this is elections set to take place in the spring, which give context to the decision to spend the revenue windfall now rather than try to reduce the deficit more quickly.
While Grecology was away
The inflation rate continued to go up, a lot, then began coming down. It looks like Greece saw stronger economic growth in 2022 than its eurozone peers, aided by a solid recovery in tourism, but the current account deficit is a cause for concern.
That’s a brief review because there will be plenty of chances to go deeper in future roundups. Meanwhile, for anyone who missed it, I did write a piece in November that touched on these points.
The annual growth rate in Greek bank lending to the private sector increased to 6.3 percent in December from 5 percent the month before.
Lending to non-financial corporations grew 11.8 percent
Lending to households shrank 2.5 percent
Private sector deposits held at Greek banks increased by 5 billion euros in December to 188.7 billion euros.
Building activity in October, measured by permits issued, increased 8.2 percent compared with the same month a year earlier. For the first 10 months of the year, the increase was 3.3 percent compared with 2021.
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Next week’s key releases
Monday, Jan. 30:
January economic sentiment indicator (European Commission)
Tuesday, Jan. 31:
November retail sales (Elstat)
Fourth-quarter bank lending survey (Bank of Greece)
Wednesday, Feb. 1:
December unemployment (Elstat)
January manufacturing PMI (S&P Global)
Thursday, Feb. 2:
December interest rates on deposits and loans (Bank of Greece)
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