ECONOMY

Survey shows companies feeling heat from Iraq crisis

The Greek business climate indicator edged up marginally to 101.4 points in February, indicating that while businesses were starting to feel the heat of geopolitical uncertainties, the crisis has yet to feed into the economy. The February reading improved by 0.3 points from the previous month, independent think tank the Foundation for Economic and Industrial Research (IOBE) said. The business climate indicator in the eurozone in February remained unchanged at the previous month’s reading of 98.2 points. While the February indicator suggested that rising geopolitical risks were already starting to sap business confidence, it has yet to impact on the economy, said Alpha Bank economist Dimitrios Maroulis. «VAT revenues in January rose 10.2 percent on the back of strong retail sales, indicating that business expectations have been affected but not the actual economy,» he said. The retail trade confidence indicator, the main prop behind the February reading, rose 6.6 points to 104.5, IOBE’s survey showed, as retailers issued optimistic estimates on the level of sales and possible reduction of stocks. Maroulis, however, cautioned against making predictions for the future as it was too early to predict a trend. «Business expectations have been affected by the Iraq crisis but we can’t draw any conclusions from a month. A trend is only visible from several months’ readings,» he said. The industrial confidence indicator rose to 100.5 points from 95.8 in January, with more than a quarter of industrialists predicting a rise in production and a third looking forward to higher long-term sales. The construction and the services sectors bucked the trend, falling to 127.7 points and 70.1 points respectively, down 6.6 and 7.9 points. Maroulis said the outlook for the construction sector is expected to remain robust, with growth fueled by the 2004 Olympic Games, the strong housing market and projects financed by community funds. These three factors in turn are seen as driving the economy forward in the coming years. The government is targeting growth of 3.8 percent this year, a strong pace compared with the 1 percent rate forecast for the eurozone. The Greek economy has expanded by more than 4 percent in the last three years. Banking on a short conflict, the government has thus far refrained from taking pro-active measures to counter the fallout from the war. Tourism and exports, the two sectors most likely to be hit, are the only two segments singled out for special focus. The government recently announced additional marketing and advertising funds to promote the tourist industry and expansion into Asian markets for Greek products. «Business confidence will improve if the war ends quickly,» said Maroulis.