IOBE survey shows Greece’s companies holding up well

While the majority of companies in the eurozone were gripped by gloom in the runup to the war in Iraq, Greek businesses, in contrast, showed remarkable resilience, a survey by the Foundation for Economic and Industrial Research (IOBE) indicated. The index of business sentiments in March stood at 101.2, little changed from a reading of 101.4 in the previous month, the think tank said. This was in line with last year’s average reading of 101.9. The forward-looking indicator measures businesses expectations in the coming months. The eurozone index, in comparison, dipped to 97.8 from 98.2 in March, indicating a general air of pessimism just before the start of the conflict in Iraq. The index for the 15 EU countries contracted to 98 from 98.6. The Greek economy is holding up well amid the general gloom in the eurozone, said National Bank economist Paul Mylonas. «The Greek economy is maintaining its resilience due to positive factors, among them low interest rates, the pickup in the Balkan economies, EU funds and Olympic Games-related investments,» he said. Greece is targeting 3.8 percent growth this year, expected to be the second highest in the eurozone. The European Commission and the Organization for Economic Cooperation and Development recently lowered their growth forecasts for the 12 countries to an anemic 1 percent. The International Monetary Fund is forecasting economic expansion at 1.1 percent. The construction industry continued to outperform other sectors, with the reading jumping to 131.4 in March. The index plummeted to 127.7 in February from 133.8 in the previous month as bad weather put a temporary stop to construction activity. Companies said they expect to take on more workers. The optimism was also based on prices stabilizing after the inflation spike at the beginning of the year. The retail industry posted a reading of 105.8, the highest since June 2002, as retailers said both sales and de-stocking efforts were progressing well. Bolstered by higher real disposable incomes and relatively cheap consumer loans, consumer spending is still growing strongly, although at a slower pace. The manufacturing index was unchanged at 100.5, as businesses fret over high levels of inventory and forecast flat demand. The service sector, which includes tourism and transportation, was the most affected by the uncertainties in the period just before the war in Iraq, with the index deteriorating to 65.4 from 70.1, approaching recent year-lows. The last time sentiments were this gloomy was after September 11 when the index plunged to 78.2 from 116.3 in just three months. Companies cited a lack of demand as reason for their pessimism. However, homegrown problems, such as red tape and the institutional framework, were also seen as problems.