Macro data forces reality switch

Minister admits Greece will miss 1 percent growth target as inflation slows, output plummets

Economy and Finance Minister Yiannis Papathanassiou admitted yesterday that Greece will miss its 1.1-percent growth target this year, as a fresh batch of data showed the slowing economy is further limiting price rises and pushing industrial output lower.

In Luxembourg yesterday, Papathanassiou commented: “It is obvious that the growth rate will be less than was initially expected,” but gave no new estimates.

“We are waiting to see how the economy will be influenced by measures we recently took to boost the economy,” said the minister.

“In June, in coming weeks, we will reassess the situation.”

Government expectations that the economy will expand at annual pace of around 1 percent have been described by economists as optimistic at a time when growth in the eurozone is seen as shrinking by about 4 percent.

Greece’s 250-billion-euro economy slowed to an annual pace of 0.3 percent in the first quarter of the year – its slowest pace since 1993 – and is expected to tip into recession in 2009, according to the European Commission.

The slowing economy has resulted in consumer inflation decelerating 0.50 percent year-on-year in May, its lowest annual pace in 41 years, from 1 percent in April.

Data from the National Statistics Service (NSS) showed plummeting food, car and energy prices led inflation lower in a trend likely to continue in the coming months.

Economists said they expect consumer price inflation to remain in the 0.5-0.8 percent range over the next three months before averaging out to about 1 percent for the year.

Inflation in the 16-nation eurozone stopped growing year-on-year in May for the first time, according to Eurostat, the EU statistics agency, posing a risk of deflation that could damage economic recovery.

Meanwhile, NSS also said yesterday Greece’s industrial output fell 11.7 percent year-on-year in April, contracting for the 12th consecutive month, as manufacturing production plummeted.