Economy: Positive signs from consumption, tourism on hold

Data for consumption in May are sending positive messages for government revenues and recovery. The first data of transactions show that the previous month will be better than April and May last year. But the eyes of the government’s financial staff are on tourism, which may have opened its gates, but the increase in tourist flows seems to be moving towards the end of June.

The government and the financial staff have not hidden that the big bet for this year’s recovery (estimates for a rate of 3.6% – 6%), but also for the course of revenues is tourism and consumer spending, in addition to, of course, to the stimulus given by the projects of the Recovery Fund. Private consumption represents about 70% of GDP, while the Ministry of Finance has predicted that tourism revenues this year could reach 45-50% of the revenues generated in 2019.

For the tourism sector, June was an indicator for the whole season and now the delay from the British market has made professionals, but also the market, wary until July, as the weight seems to be lifted mainly by visiting Germans, while the Dutch have also slammed the brakes. Prior to the announcement of the new government measures to support tourism amounting to 420 million euros, about 20% of the hotels had opened, although they had few bookings.

So, despite the consumption surge in May, tourism is the big challenge for this year. Of course, after the improved statistics on the course of GDP in the first quarter – during which a recession below estimates was recorded (-2.3%) – the optimism that the economy will enter a recovery from the second quarter is strengthened. Analyst forecasts point to a strengthening of the positive trend in May, which heralds GDP growth of even 10-11% per year.

In May, tourism did not have a large contribution to GDP, but other activities such as construction and exports played an important role, which recorded a steep increase of 49.7% as in April they amounted to 3,172.1 billion euros compared to 2,119.3 billion in April 2020. At the same time, transactions – after the lifting of the lockdown – give positive indications for the course of state revenues during the second quarter of the year with June being an important month, during which the tourism data will be seen.

Electronic transactions increased by 15% in the first quarter compared to 2020. May also shows an upward trend sending positive messages about the course of revenues. It is noted that during the first three months of the year the backlog in tax revenues was 3.3%, which were reduced by 359 million euros reaching 10,509 million euros against the budget revenue target of 10,868 million euros. In January and February this year, the annual decline in VAT revenues was milder (-10%, on average, compared to -24%, respectively, in the period March-December 2020), while in March they increased by 31%, compared to the same month in 2020. In April, tax revenue was 3.464 billion euros, up 215 million euros or 6.6% from the target.

The National Bank’s monthly index – which juxtaposes information from high-frequency and economic indicators with fiscal and financial data – indicates an annual growth of 9.7% in April. The positive trend seems to be further strengthen in May with this indicator predicting GDP growth of about 11% per year and 2.4% on a monthly basis, as more sectors of the economy reopen and uncertainty subsides. In the whole of 2021 there are now strong chances that the annual GDP growth, which predicts the basic scenario for the whole of 2021 may exceed 4.7%. This estimate incorporates a forecast of an annual increase in tourism revenue of 80% – with revenues, however, remaining 55% lower than in 2019 – which is still reasonable, based on early indications that tourism