Central bank sees growth at 3.3 pct

Governor says domestic financial system is ‘healthy, secure and stable’ as conditions change

The global financial and credit crisis is putting the brakes on the Greek economy this year but the country's banking system remains in good shape, the Bank of Greece said yesterday.

The country's central bank said in its annual monetary report that economic growth is seen as slowing to 3.3 percent in 2008 from 4.0 percent in 2007, mainly due to a slowdown in consumption.

«The private consumption growth rate is showing a major slowdown, which reflects lower household incomes from rising petrol and food prices and the general climate of uncertainty,» the report said.

Greece's 246-billion-euro economy expanded by 3.5 percent in the first half of the year, slightly down from 3.6 percent in the first quarter, as higher lending costs weighed on investment activity, particularly in residential housing.

Despite the drop-off, Greece's economic growth this year will remain above the eurozone's average, supported by domestic demand, the central bank added.

Bank of Greece Governor Giorgos Provopoulos said the crisis is rubbing off on Greece, forcing banks to adopt a more flexible stance toward changing conditions. «Despite the pressure on international financial markets, whose indirect consequences affect our country, the Greek banking system basically remains healthy, secure and stable,» Provopoulos said.

Greek bankers have repeatedly said local lenders have limited exposure to US subprime loans after having based strong growth rates in recent years on expansion into Southeastern Europe and robust credit expansion at home.

The difficult international economic environment has further exposed the structural weaknesses of the Greek economy, added Provopoulos.

On the price front, headline consumer inflation is expected to average out at 4.6 percent this year, according to the report.