Bank of Greece to revise growth estimate upward

The Bank of Greece will revise upward its forecast on Greece’s economic growth for 2003, central bank governor Nicholas Garganas said yesterday. The Bank of Greece had forecast that Greece’s gross domestic product (GDP) would grow 3.7 percent, while Economy and Finance Minister Nikos Christodoulakis had forecast a 3.8 percent growth. (Half-year data published by Eurostat show Greece’s GDP was growing at a 4.4 percent annual pace. Last year, the GDP had risen 4.1 percent; the Bank of Greece had forecast a growth of 3.5 percent.) On the other hand, the bank’s average inflation forecast will remain unchanged, at 3.6 percent. Garganas avoided commenting on the government’s recent announcements providing handouts to the most needy and referred reporters to the bank’s interim report, which will be presented in early October. Asked when Greece will achieve real convergence, that is, when its income will become equal to the average income in EU countries, Garganas replied that «the important thing is not to set numerical targets, but to find ways to accelerate growth.» (Months earlier, Garganas had estimated that real convergence would not take place before 2030; Christodoulakis has put convergence at 2015.) Garganas said that following the deregulation of consumer loans last July 20 there was a slight leveling off in new loans. He said he was satisfied with how Greeks, both individuals and enterprises, pay back their loans but added the number of defaulting loans was still higher than the EU average. According to Bank of Greece data, household indebtedness, from consumer and housing loans, was still quite low, being equal to 22.5 percent of Greece’s GDP. The EU average is 47.5 percent. The top Greek banker also provided additional explanations about the sale of 22 tons of gold by the Bank of Greece. He admitted that not informing the public immediately was a «miscommunication» but added that there is no rule obliging the central bank to inform the Capital Market Commission. Garganas added that he himself had informed both Christodoulakis and Prime Minister Costas Simitis. He also said government Christos Protopappas was «badly briefed» on the subject. The proceeds from the gold sale did not go toward either reducing the government debt or to finance the government’s handouts, as it was widely alleged when news of the sale broke out, but to buy Finnish and German bonds. Garganas also provided data about Bank of Greece’s holdings in state bonds. On December 31, 1998, the central bank held treasury bonds worth 2.03 billion euros, with an average yield of 8.22 percent. On August 31, 2003, it held bonds worth 3.58 billion euros, with an average yield of 5.05 percent. all these bonds were acquired on the open market. Garganas also said that the bank did not intend to de-list itself from the Athens Stock Exchange. At present, the Greek State holds 8.7 percent of Bank of Greece’s shares; social security funds hold 33.85 percent; individual investors hold 42.49 percent; the Church and cooperatives hold 10.9 percent; and institutionals investors, 5.2 percent.

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