OECD report forecasts strong Greek growth ahead

The latest report by the Organization for Economic Cooperation and Development (OECD) on the Greek economy, released yesterday, appears to be generally in line with the estimates contained in the draft 2002 budget due to be tabled in Parliament today, that Greece’s growth rate will remain strong next year despite the global economic slowdown. Output growth is seen as remaining broadly unchanged at around 4 percent – a rate more than double the eurozone average – and accelerating to 4.3 percent in 2003. However, despite lower oil prices, inflationary pressures are likely to be maintained. With oil prices declining and moderate wage increases, supply-side pressures on inflation are expected to recede over the projection period. However, domestic demand pressures are projected to gather strength, and higher consumer price increases in the short run cannot be ruled out, notes the report. The OECD finds that Greece’s entry to the eurozone has helped the consolidation of fiscal stability and the promotion of structural reforms, but urges even tighter measures for controlling primary government spending and speedier structural reforms for dampening inflation. Progress in addressing labor and product market rigidities, along with bold reforms of the pension system and public sector management, would facilitate non-inflationary growth and enhance incomes over the medium term. The report forecasts a small fiscal surplus equivalent to 0.2 percent of GDP for 2001 – against 1.1 percent of GDP deficit last year – and surpluses of 0.6 and 1.3 percent of GDP for 2002 and 2003, respectively, thanks to lower debt servicing costs, better revenue collection methods and higher growth rates. For 2002-03, OECD foresees a favorable investment environment, expecting a rise in private consumption due to the combination of the advantages of entry to the eurozone, preparations for the 2004 Olympic Games and European Union investment subsidies. Imports are projected to rise 4.5 percent in 2002 and 7.1 in 2003, but the expected recovery of the global economy should also help exports move higher by 4.3 and 8.2 percent respectively. Unemployment is projected to decline from an expected 11.2 percent for 2001, to 10.9 percent in 2002 and 10.4 percent in 2003. The integrated bank will be called National Bank. The legal procedures for the integration are due to be completed in the first half of 2002. NBG was advised by Schroder Salomon Smith Barney and Alpha by Goldman Sachs.

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