ECONOMY

Greece seen outgrowing other eurozone countries

Greece yesterday said it expects to outshine other eurozone countries this year by setting a strong pace in economic growth, fueled by robust investments and private consumption. «The 3.8 percent growth target this year is feasible and in line with the initial forecast,» Economy and Finance Minister Nikos Christodoulakis said, unveiling the government’s semiannual economic report. The eurozone, in contrast, is expected to languish in the doldrums, with the European Central Bank recently predicting growth ranging from 0.4 percent to 1 percent in 2003. Greece’s optimistic forecast came in the wake of a raft of sturdy economic data which showed the domestic, consumer and investments sectors continuing to grow at a robust pace in the first quarter. Retail sales, the volume of construction permits and payments made by the Public Investment Program surpassed last year’s figure, the Finance Ministry said. The sharp jump in value-added taxes and the 16.3 percent increase in revenues of quoted companies not including the financial sector similarly pointed to sustained strong economic activity, it added. Growth is expected to be driven by a projected 9.5 percent rise in investments as the government speeds up Olympic Games-related projects, a 3-percent increase in private consumption, a 2.1 percent rise in exports and a 3.1 percent increase in imports. Sustained strong domestic demand together with accelerated Olympic Games projects and a projected recovery in Europe should see growth picking up to 4.1 percent in 2004, said Christodoulakis. A slowdown to 3.6 percent is projected for the 2005-2006 period. Inflation, Greece’s Achilles’ heel, is seen falling to 2.5 percent by year-end and averaging out at 3.3 percent on the back of falling oil prices and lower borrowing costs. Christodoulakis, however, warned that the government’s target of a 0.9 percent budget deficit this year could be blown off course by unexpected bad weather claims estimated at around 600 million euros. Greece has filed for EU compensation. «Discounting the claims, the 0.9 percent budget deficit is attainable,» he said. The economic report projects a sharp fall in the budget deficit to 0.4 percent in 2004. The debt-to-GDP ratio is seen declining more than five percentage points to 99.3 percent this year and to 95 percent in 2004. The unemployment rate, among the highest in the eurozone, is expected to decline to 9.1 percent this year, against a eurozone average of 8.8 percent. Strong growth notwithstanding, Greeks will only see a 2.2 percent increase in real wages this year, down from 3.1 percent in 2002, while labor productivity is expected to deteriorate to 2.8 percent from 4.1 percent last year, the economic report forecast.