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Economy

Greek Economic Forecast: 4% Growth During Soaring Inflation

ATHENS – Tourists are spending so much that Greece’s economy is expected to grow 4 percent during the lingering COVID-19 pandemic through 2022, but still no plans to reduce a 24 percent Value Added Tax (VAT) on food.

Prime Minister Kyriakos Mitsotakis, with an eye on 2023 elections, will use his Sept. 10 apperance at the Thessaloniki International Fair (TIF) to make the rosy prediction, said Kathimerini, along with more handouts coming.

His Senior Economic Adviser, Alex Patelis, told Bloomberg TV that growth will exceed initial estimates thanks to better-than-expected tourism revenue figures that could bring a record 20 billion euros ($20.07.)

Current account data released by the Bank of Greece showed record receipts in June even though arrivals that month were 89 percent in the same month in the record year of 2019, indicating a higher level of visitor spending.

Government officials are awaiting the report of the European Union’s statistics authority ELSTAT for the Gross Domestic Product (GDP) numbers for the second quarter of the year, the paper said.

A complicating factor is how much state aid is being given households to deal with the costs of inflation that’s the highest in 29 years and cutting so deep into budgets that subsidies are needed for gasoline and electric bills.

A 4% growth rate is estimated to create so-called “fiscal space” of about 2 billion euros, about what it’s costing the government to buy 18 French-made Rafale fighter jets to deal with Turkish provocations.

There’s also the cost of buying up to 40 US-made F-35 fighter jets as well as upgrading the Hellenic Air Force’s fleet of F-16s as Mitsotakis is further building an arsenal for defense.

But inflation will have to be revised upward, to 8.9 percent, according to the European ommission, from 5.6 percent estimated by the Stability Program devised by Greece and its EU creditors, offsetting revenue gains.

Patelis told Bloomberg the government is trying to be cautious and hopes the GDP growth might even exceed 4 percent as the goal is try to try reach investment grade in the markets with the end of EU post-bailouts surveillance.

“It is very important to maintain our credibility,” Patelis said. “Any fiscal support measures must be measured, targeted and proportional,” after the government it could afford to cut the tax on food.

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