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Government macro-fiscal plan, during 2021 budget deficit will continue to be problematic, spending cuts to reduce debt
Written by Esmeralda HIDA 19 Janar 2021
The government published yesterday the medium-term micro-fiscal plan which shows the economic parameters projected from the current year until the end of 2024. After the shock our country received from the pandemic, it is necessary this year to start a recovery to save businesses in the country from bankruptcy. Although it all depends on the duration of the pandemic, the government has published its plan of actions to be taken for economic stabilization. The plan published in the Official Gazette states that the focus will be on reducing public debt. However, the government acknowledges that this will be difficult with the pandemic still present and during this year no significant changes are expected, even the budget deficit is forecast at high rates by the end of 2021, while effective improvement will be in 2023. "As a result of two consecutive shocks, first from the earthquake and then much stronger from the COVID-19 pandemic, the primary balance is expected to mark slightly negative values ??for 2022, at about 0.1 percent, although with a strong improvement from the negative level. of 3.9 percent, which is expected for 2021, while the return to positive values ??from 2023 with 0.6 percent and 1.1 percent in 2024 is continuously targeted ", the document states. Under these conditions, consequently, the public debt will continue to remain high in this medium-term period with 78.6% in 2021 and is projected to go towards the necessary stabilization at the end of 2024 at the level of 68%. Of course this expectation will only be met if the government implements the points suggested by the internationals regarding spending and the fiscal system,
Expenditure reduction in 2022-2024
Based on EU directives to reduce public debt in the coming years, the government has decided to keep budget expenditures unchanged for four years, while forecasting increasing revenues with an average annual level of 8.1%, while the peak of growth is expected to be reflected in 2023. “Although fiscal policy will continue to be oriented towards consolidation in the medium and long term, the government budget policy to maintain a level of public investment at over 4.5 percent of GDP, in the years 2022-2024 will stimulate gross fixed capital formation in the economy. While the total budget revenues for the next three years (2022– 2024) are projected to increase on average by about 7.1 percent each year. More specifically 6.9 percent for 2022, 7.6 percent for 2023 and 6.9 percent for 2024. "Tax revenues for this period are projected with an average annual increase of about 8.1 percent", is explained in the plan published by the government. In terms of employment, the government forecasts an increase of 1.2% for each year until 2024, where it is emphasized that this incentive will come more from the services and construction sectors. However, the employment rate will be slower. "In line with medium-term growth forecasts, employment is expected to grow at an average of about 1.2 percent per year during 2022-2024. The higher labor force participation rate will be the main generator of labor supply growth. While the increase in labor demand is expected to reflect more or less the same structure of the aggregate supply perspective of economic activity. Consequently, services are expected to contribute more to the increase in labor demand compared to other sectors of the economy. "Despite the expected expansion of employment in the medium term, overall labor productivity is expected to continue to gradually improve during this period," the document reads.