Ghost from the past balance sheet deficit current affairs, again came to the fore on the occasion of its spring forecasts Commission who calculated it for an alarming 11.8% of GDP in 2022, but also for a strong warning bell from the governor of the Bank of Greece. Yannis Sturnaras on this particular subject.

In fact, the head of the central bank has highlighted the other side of the balance of payments deficit: negative savings. “The government deficit should be significantly reduced, it should become a surplus, and national savings should also increase,” he said in an interview with Neftemporiki last week. “We don’t need measures that cut national savings.”

Indeed, the balance deficit, in addition to lagging behind export us compared to import it also reveals a second picture: the lag of national savings, public and private, compared to investment.

In other words, our savings are not enough to finance the ongoing investments. This is due to the fact that consumption is large. Therefore, we need to borrow in order to invest. A situation that is clearly not sustainable in the long term.

Only during the 2020-2021 pandemic, when consumption fell to very low levels, did savings move into positive territory, but then consumption grew again at a faster rate than gross disposable income, again reversing the propensity to save negatively.

The whole problem boils down to one simple fact: we spend more than we produce. This is a permanent wound of the Greek economy, which, it seems, could not be radically cured during the period of the memorandum.

This may not have been in the electoral debate, but as economists say, the problem will be with us in the coming years if it is not cured by increasing domestic production and import substitution. They warn that at some point the markets will think that a country whose external debt is constantly growing is not viable.

Development model

The problem may not have occupied the pre-election debate, but we will find it before us, economists say.

OUR Thassos AnastasatosChief Economist at Eurobank, recently noted in Delphi forum that although the current factors of the pandemic and the energy crisis are partly responsible for the increase in the external deficit, its persistence over time shows that it is a structural characteristic of the Greek economy.

The growth model of the Greek economy has not been sufficiently reformed to ensure that any acceleration in growth rates is not accompanied by an even greater increase in imports. He noted that each increase in consumption increases imports, and investment also has a very large share of imported goods. As he explained, only almost half of the deterioration in the balance sheet in the period 2019-2022 is associated with higher fuel prices.

Mr. Anastasatos also draws attention to the problem of savings, emphasizing that increasing it should be the main drive to curb consumption and hence imports and conserve resources for investment.

The problem concerns not only individuals, but also the state. Benefits distributed by the state become consumption, remind economists. Instead, Ireland decided to direct corporate income taxes not to benefits, but to a public savings fund to meet future needs.

Mr. Sturnaras, in his interview, left a clear advantage in terms of what the parties promise to give in order to be elected. According to him, the announced measures should not reduce national savings and worsen competitiveness.

The government’s goal is to increase the percentage of investment from the current 14% of GDP to 22% of GDP, which is the EU average. This cannot be done without increasing savings to finance increased investment.

Improvement from this year

The balance sheet picture is expected to improve from this year. According to the Eurobank, the deficit will fall from 9.6% of GDP (the calculation method differs from the commission) to 7% of GDP this year, while the National Bank in its recent analysis predicted a deficit this year at 6.5% of GDP. and then, after 2024, a further decline to 4% of GDP. A bet that is stable. This estimate is based on an expected increase in external demand, as well as a stronger correlation between household consumption spending and disposable income as the post-pandemic consumer boom passes.

Also, the analysis of the National Bank indicated that fiscal tightening after the pandemic will also contribute to further improvement in the current account balance. Accordingly, the Commission forecasts a reduction in the balance sheet deficit from 11.8% of GDP in 2022 to 9.2% of GDP this year and to 7.8% in 2024. The percentage that will remain then, as it is now, the highest in the eurozone.