Official optimism on economic growth
Greece is still on course to achieving growth of more than twice that of the eurozone this year despite the expected global slowdown, National Economy Minister Yiannos Papantoniou said yesterday. A prudent fiscal policy means that the country will post a budget surplus this year in line with objectives set out in the stability and growth program, he stressed. The government last year issued a gross domestic product (GDP) growth forecast of 5 percent and a budget surplus equivalent to 0.5 percent of GDP for this year. The first figure has been revised twice since then, with the latest official estimate released early this month, suggesting 4.6-percent growth. The short-term impact of the global slowdown on the domestic economy will be at the lower end of estimates, Papantoniou said. The minister’s optimism contrasted sharply with the conclusions of the extraordinary Brussels European Council which met last Friday. Speaking after the special summit, Council President Guy Verhofstadt, who is also the Belgian prime minister, warned that the events of 11 September mean that the slowdown of the (European Union) economy will be more pronounced than foreseen. Greece, however, will be insulated from these external developments to some degree due to two factors, Papantoniou said. Our timely entrance into the eurozone and the fact that we have promoted conditions conducive to economic growth will ensure a GDP increase of some 4.5 percent, more than twice that of the eurozone, he said. Greek resilience is due in part to the credit explosion brought on by the country’s entry into the eurozone at the beginning of the year and which has continued since then as banks slash interest rates to converge with regional rates, said Paul Mylonas, director of strategic planning and research at the National Bank. Large interest rate reductions have yet to feed fully into the economy. There is still scope for credit expansion, he said. Third Community Support Framework funds are also expected to be a locomotive of growth for the local economy, Mylonas noted. The economic rally in the Balkans is also expected to underpin Greek growth. Greek exports to the Balkans have soared as the regional economy continues last year’s growth, he said. Official optimism notwithstanding, the government plans to issue two sets of economic projections when it presents the 2002 draft budget to Parliament on October 1. We are working on an alternative scenario with provisional figures to reflect the many uncertainties. The 2002 budget will contain controlled cuts in public spending, Papantoniou said, underscoring the government’s determination to trim debt at all costs. Prime Minister Costas Simitis’s package of social spending, announced at the Thessaloniki Trade Fair early this month, and the investment budget will stay intact. The final draft budget for 2002 is expected to be ready in early November. The minister is rightly concerned about the debt problem, Mylonas said. Mr Papantoniou is saying that Greece does not have the ability to deviate from debt reduction targets, unlike other member states which have this luxury, he said.