Stability and growth plan optimistic for 2002-2006

Greece yesterday submitted to the European Commission its updated stability and growth program covering the period 2002-2006, which foresees the economy growing by an average of 3.8 percent in the next four years, public finances achieving a balance in 2005 and public debt falling below 90 percent of GDP in 2006. «Although the international economic environment remains highly uncertain, the medium-term prospects of the Greek economy are positive,» the stability and growth program noted. Fueled by robust domestic demand, the inflow of community funds and 2004 Olympic Games-related projects, the economy is expected to expand by 3.8 percent next year and by 4 percent in 2004. With the momentum provided by the Olympic Games coming to an end in 2004, economic activity is seen slowing down to 3.7 percent and 3.6 percent in 2005 and 2006 respectively. Prodded in part by Eurostat’s stricter accounting standards and also by the European Commission’s proposal that highly indebted countries slash their debt levels by some four percentage points annually, the stability and growth program sets out a drastic debt-reduction schedule over the next four years. Projected at 100 percent of GDP next year, public debt is due to decline to 96.1 percent in 2004, 92.1 percent in 2005 and 87.9 percent in 2006. The medium-term outlook for public finances is equally optimistic. The 0.9 percent budget deficit projected next year is expected to fall to 0.4 percent in 2004. A 0.2 percent surplus should be attained in 2005, the first in the country’s postwar history. The surplus is expected to increase threefold to 0.6 percent in 2006. With little change in government expenditure over the next four years, the improvement in public finances and debt will need to come from proceeds generated by the state divestment program. Eleven companies, in which the State currently holds majority or full control, will be offered to strategic investors in the coming years or sold on the stock market. On the list are Hellenic Petroleum, the Piraeus Port Authority, Hellenic Stock Exchanges, Public Gas Enterprise, Hellenic Tourist Properties, Public Power Corporation, Hellenic Postal Services, the Athens Water and Sewerage Company, Olympic Airways, Agricultural Bank and the Postal Savings Bank. The stability and growth program points to a declining trend in harmonized consumer price inflation in the next four years but conceded that it would remain above the European average. Projected at 3.9 percent next year, harmonized inflation is seen falling to 2.9 percent in 2006, above the European Central Bank’s 2 percent ceiling. The stability and growth program also presented an alternative scenario based on an oil shock brought on by a war against Iraq and the continued decline in stock markets, under which economic activity would grow by an annual 3.1 percent.