Economy seen in good shape

Sliding euro, cheaper fuel expected to favor growth in second half of the year, says Alpha Bank

By Stelios Bouras - Kathimerini English Edition

Greece’s economic growth is expected to remain strong in 2008 despite the international economic crisis, with a lower euro and cheaper fuel helping boost consumption and investment spending in the second half of the year, a leading Greek bank said yesterday.

Alpha Bank, Greece’s third largest lender, said in its weekly report that gross domestic product (GDP) is expected to expand by 3.6 percent for the year, 2.7 times more that the eurozone’s anticipated growth rate.

“With a reduction in the cost of gasoline and food in the second half of 2008 and the slide of the euro, it is expected that there will be a boost in consumer spending, a rise in investment and a continuation of the positive impact net exports have on GDP growth,” the bank said.

Greece’s economy grew in the second quarter of the year at the slowest pace since the country adopted the euro in 2001, as faster inflation and higher interest rates checked spending.

GDP growth slowed to an annual 3.4 percent in the three months through June from 3.6 percent in the first quarter, according to preliminary data.

For the remainder of 2008, Alpha Bank sees a rebound in investment activity partly due to a better performance of the residential housing sector.

“It is very difficult for such a large drop in building activity (as seen in the last three quarters) to continue in an economy where credit expansion in housing loans is 17 percent,” the report added.

The recent depreciation of the euro will also boost the competitiveness of Greek products, with net exports adding up to 1 percentage point to GDP.

Greece’s trading partners are mainly based in southeastern Europe – a region where economic growth rates have remained robust.

The vital tourism sector, which contributes to export receipts, has also grown by three percent in the first half of the year despite an expected drop in figures for the whole of 2008.

On the inflation front, consumer prices are expected to end the year at an average of 4.7 percent versus 2.9 percent for 2007. sbouras@ekathimerini.com