ECONOMY

BoG expects 3.7 pct growth

Greece is expected to continue growing at a robust pace this year on the back of strong domestic consumption and investment spending, with the fallout from a war in Iraq mainly affecting the tourism industry and inflation, the Bank of Greece said in its spring monetary policy report released yesterday. «The consequences of a war in Iraq will, however, depend on the nature, the extent and the length of the crisis,» Nicholas Garganas, BoG governor, said. He said domestic consumption and economic activity will remain relatively unscathed but that the tourism industry and consumer prices could take a hit. Inflation in particular is seen as hovering at stubbornly high levels, with the central bank estimating core inflation, which excludes fresh produce and fuel prices, unchanged at last year’s level of 3.6 percent. Garganas said the government could limit the impact by keeping a vigilant eye on the energy market to head off profiteering and if businesses do their part by containing price increases. Workers, in turn, should link wage increases to productivity gains. «Geopolitical uncertainties notwithstanding, it is possible that economic expansion this year will continue to be satisfactory as growth relies on domestic factors,» Garganas said. «GDP is projected to grow by 3.7 percent.» Private consumption, the engine of growth in 2002, and projects related to the 2004 Olympic Games are expected to drive the economy forward, he said. Faster structural reforms would also improve confidence. Garganas also sounded a warning on the trade deficit. The global recession, the declining competitiveness of Greek products and services brought on by the euro’s appreciation, and falling tourist receipts due to geopolitical uncertainties could widen the deficit.