Greece is set to revise its 2025 budget after a surprising surge in financial performance, leaving the country with more funds than originally anticipated. The revision comes as tax revenues have exceeded expectations and the country has made significant progress in repaying its loans ahead of schedule.
In a recent report, Greece's Minister of Economy and Finance, Kostis Hatzidakis, revealed that the country had generated a budget surplus of €6.1 billion between January and October of this year. This is in stark contrast to the originally forecasted deficit of €2.2 billion. Additionally, the primary budget balance, which excludes debt service, showed a surplus of €13.5 billion, far surpassing the expected €6.1 billion.
The better-than-expected financial performance was partly driven by a strong economy. The European Commission forecasts 2.1% growth for Greece this year, with the government projecting a slightly higher 2.2%. This robust growth has propelled tax revenues, which are expected to reach €68 billion for 2024, up from the €66.2 billion initially forecast. The Ministry of Finance anticipates further growth in 2025, with revenues potentially rising to €70 billion.
A key factor behind this financial windfall is Greece's success in combating tax evasion. A government push towards digitalisation and the rise of cashless transactions have helped narrow the VAT gap—the difference between expected and actual VAT collected. From 2017 to 2021, Greece reduced its VAT gap by nearly half, from €6 billion to €3.2 billion, with further reductions expected in the coming years.
Hatzidakis had initially projected additional tax revenue of between €1 billion and €1.2 billion this year due to anti-tax evasion measures, but the actual figure is set to exceed €2 billion. This windfall is expected to continue, with an additional €2.3 billion anticipated next year. This gives the government more flexibility to implement tax cuts and increase pension payments.
Greece's fiscal health has also benefited from a successful privatisation program, which is expected to raise €5.8 billion in 2024, the highest amount since the program's inception in 2011. One of the largest transactions took place in October when the government received €3.27 billion from the 25-year concession of the Athens Attiki Odos motorway.
These privatization proceeds are being used to reduce Greece's public debt, which had soared during the debt crisis of the 2010s. In line with its loan agreements, Greece is repaying its debt more quickly than expected. On December 15, the government plans to pay off €7.9 billion in bilateral loans from eurozone countries ahead of schedule. Additional early repayments are expected next year, totaling €5 billion.
As a result of these measures, Greece's debt-to-GDP ratio is projected to fall to 146.8% in 2025, the lowest level since the height of the sovereign debt crisis. The country's stronger-than-expected financial position is positioning it for further fiscal stability and growth in the coming years.
(Source: Market News)
