“The regaining of the investment grade rating will result in the diffusion of the lower cost of borrowing in the private sector but also in the elimination of the additional risk for investments,” the Parliamentary Budget Office said adding that the achievement of the specific goal will improve next year’s growth rate by at least half a percentage point: from 2.2% forecast for 2024 under the “baseline scenario” to 2.7%.
An additional half percentage point in GDP translates into an additional 1.1 billion euros of national income and more than 400 million euros of additional revenue for the state.
The Budget Office has prepared three scenarios regarding the course of the economy this year and next year. These are variations on the baseline scenario which is as follows: The growth rate is seen at 2.2% this year and next year while inflation is expected to decrease to 2.3% in 2024 from 4.6% in 2023.
1. The first scenario incorporates the achievement of investment grade rating. “According to this scenario, the investment tier, to the extent that its positive effects spread directly into the real economy, will trigger an increase in private investment that will boost GDP growth to 2.3% in 2023 and 2.7% in 2024, i.e. 0.1 and 0.5 percentage points above the baseline scenario. Therefore, obtaining investment grade could have an appreciable positive effect on the economy as a whole in addition to the favorable effects on public debt management,” it said.
2. The second scenario incorporates a faster reduction in income support to households and businesses to cover energy costs and increased prices and is supposed to cause lower government transfers by 10% compared to the baseline scenario. In scenario 2, the reduction in government transfers would limit private household consumption and lead to GDP growth of 2% in 2023 and 2.1% in 2024, i.e. 0.2 percentage points and 0.1 percentage points below the baseline scenario.
3. The third scenario sees better-than-expected public revenues that would allow a 2% increase in public consumption compared to the baseline scenario. In scenario 3, the increase in public consumption will lead to a growth rate of 2.3% in 2023 and 2.2% in 2024, i.e. 0.1 percentage points above the baseline scenario for 2023 but no difference from the baseline scenario for 2024.