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Economy

Greece forecasts fastest GDP growth in two decades, plans additional tax cuts

Published: Updated:

The Greek government raised its growth estimate for 2021, with the country set to repeat the economic performance not seen in about two decades.

The revised forecast came after a stronger-than-expected expansion in the second quarter, paving the way for the government to roll out 3.4 billion euros ($4 billion) of additional tax-relief measures and other assistance to combat rising prices.

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“Today I am able to announce the revision of the growth target for the Greek economy for 2021 from 3.6 percent to 5.9 percent, Prime Minister Kyriakos Mitsotakis said in a speech at the Thessaloniki International Fair in northern Greece.

Strengthening entrepreneurship in order to create new jobs remains the government’s top priority and the new package of measures will boost liquidity, business growth and promotion of green and digital investments, he said.

Greece’s economy expanded 3.4 percent in the second quarter compared with the January to March period, driven by strong investments.

Output rose by 16.2 percent in the second quarter compared with the same period in the previous year. Despite the effect of a series of partial lockdowns, quarterly GDP is now running above pre-pandemic levels.

Measures to help businesses include a lowering of the corporate tax rate to 22 percent from 24 percent from 2022 and a 30 percent reduction in tax on income for companies that proceed with mergers and acquisitions.

The government now sees a stronger than previously expected third quarter given the positive signs from tourism, Greece’s largest industry, accounting for over a quarter of jobs and around a fifth of the economy. The sector’s robust performance this summer, after pandemic restrictions were gradually lifted, wasn’t reflected in second-quarter data.

Mitsotakis also announced measures to help households offset an expected rise in food and power costs amid higher international prices for transportation, raw materials and energy. These include a reduction in the level of sales tax until June 2022 for coffee, transport, non-alcoholic drinks, cinemas, gyms, dance schools and tourism packages.

During the fourth quarter, all households will receive a subsidy for the first 300 kilowatt hours consumed to cover most of the expected price hike in power bills.

“We are creating a shield of protection against certain price increases that are already occurring worldwide, Mitsotakis said.

Mitsotakis also said that Greece will buy a further 6 Rafale fighters, increasing the number to 24.

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