Sharp drop in building activity

Construction permits down 22 percent in January as central bank tips economy to come to a halt in 2009

The year got off to a poor start for the construction sector, with the number of new building permits in January falling sharply, as Greece’s central bank predicted the economy will slow to a complete halt in 2009.

Data from the National Statistics Service (NSS) showed yesterday that construction activity in January fell 22.5 percent year-on-year.

NSS said 3,835 new permits were issued nationwide in January, corresponding to 840,500 square meters, versus 4,946 permits a year earlier, covering 1.318 million square meters.

The drop in building activity, which declined 15.4 percent in 2008, reflects the slowdown in Greece’s economy.

The country’s central bank expects the economy, which contributes about 2.5 percent to the eurozone economy, to slow to zero in 2009 from 2.9 percent growth pace in 2008.

Bank of Greece Governor Giorgos Provopoulos said late on Wednesday the crisis “has negatively affected the country. In 2009, we expect the stagnation of economic activity, that is, zero economic growth.”

The head of the central bank said Greece’s gross domestic product (GDP) growth had slowed to 2.9 percent in 2008 following a sharp slide in investment. GDP growth stood at 4 percent in 2007, he added.

The country has recorded strong growth in recent years but the Economy and Finance Ministry has recently revised this year’s growth level to 1.1 percent.

In January, the European Commission forecast growth this year of 0.2 percent for Greece.

“The financial crisis affects economic activity in two ways. On the one hand, banks use more stringent criteria in providing loans, while, one the other, consumption stops,” Provopoulos said.

He noted that there was a “drop in real estate investments and that companies are no longer taking risks.”

In January, Greece was the first country in the eurozone to see its sovereign debt rating downgraded by ratings agency Standard and Poor’s.