Fast growth mitigated by rising debt

The Greek economy has been expanding at a pace almost eight times that of the eurozone in the first nine months of 2002, and private consumption is still growing strongly, according to the latest data released by the Ministry of Economy and Finance. On the other hand, the growth of imports once again outstripped export growth, revealing the economy’s competitiveness problems. Moreover, a study by a state-affiliated economic think-tank shows that household indebtedness is rising at an alarmingly fast pace, with potential adverse effects for the economy. The Finance Ministry estimates that the Greek economy will grow 3.9 percent in 2002, slightly off the 4.2 percent achieved in 2001. However, it has resisted the global slowdown much better than the eurozone, where growth will average 0.5 percent, against 2.1 percent in 2001. Private consumption is growing at a 2.5 percent annual clip, only slightly lower than in 2001, when it rose 2.7 percent. In the eurozone, according to first-half statistics, consumption growth slowed to an annual pace of just 0.4 percent, versus 1.8 percent for 2001. Connected with consumption growth is the high level of growth of private sector financing (21.4 percent, against 25.5 percent in 2001), which is much higher than the eurozone’s, where the respective numbers are 5.1 and 7.6 percent. That and the inflows from the European Union help investments rise by an estimated 10 percent, up from 7.6 percent in 2001, while, in the eurozone, investment will actually fall 2.8 percent, after rising marginally (0.8 percent) in 2001. Minimum nominal wages increased 5.2 percent in Greece (3.3 percent in 2001), as against 3.1 percent in the eurozone (3.2 percent in 2001). This higher increase was almost totally swallowed by higher inflation, which has averaged – by the harmonized rate – 4 percent in the first months of 2002, compared to 2.2 percent in the eurozone. After dropping 1.7 percent in 2001, imports increased 3.7 percent this year, while exports increased 2.7 percent, against a drop of 1 percent last year. In the eurozone, both imports and exports declined this year (3.4 percent and 2.8 percent, respectively). A report by the Center for Planning and Economic Research, which does not include 2002 data, points out that household indebtedness is rising at many times the pace of economic growth.

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