Greeks see rosier income prospects for the first time in years, but spending snags remain

Greeks are confident of an improvement in their household incomes as a result of the recent changes in the political scene and the country’s continuing economic progress, which is expected to receive a further boost from the holding of the Athens Olympics, private research group ICAP said in an opinion poll presented yesterday. The poll, conducted a little after the March 7 general election – from March 15 to April 5, was based on a sample of 600 urban households. According to the poll, Greeks are now more optimistic than at any other time in the last four years. Those believing that their finances will worsen declined substantially to 30.7 percent, the lowest in the last four years and compared with 50.5 percent in 2003. Those expecting an improvement in their financial situation during the current year went up to 20.5 percent from 13.2 percent in 2003, while 34.7 percent believe that their finances will remain stable; 14.2 percent said they had no clear view of their prospects. Yet, rather at odds with the results of the poll, business people, merchants and small manufacturers, whose opinions are largely considered as the country’s economic barometer, appear much more pessimistic than households. According to ICAP poll, the positive projections are based upon expectations for a retreat in inflation and income enhancement along with the improvement of the job market. Caution still prevails In spite of the revival of sentiment, it appears that the time is not yet ripe for luxury consumption. The lion’s share of family budgets will continue to go to inelastic spending on food, with 14.5 percent of those questioned believing that they will have to increase such spending due to projections for further price rises. A second, major expense category concerns the education budget, with 5 percent of the poll participants declaring that they will probably face increased costs, belying the claim of a free public education system. A large percentage of household incomes will also go on housing expenses, with 4.7 percent of people questioned expecting increases on this front. By contrast, 14.3 percent of poll participants plan to make severe cuts in their holiday budgets, confirming the dire situation of the tourist industry. The 2003 background The upbeat projections for the current year appear to be largely based on the experience of 2003, when incomes managed to hold their own for the first time since the year 2000. After a fall in real disposable incomes during the 2000-2002 period, the increasing number of those whose income remained stable and the lower number of households which reported declines in income in 2003 were seen as small steps forward. Yet the overall statistics are still not encouraging. The financial situation of 47.3 percent of Greek households worsened in 2003, against 54 percent in 2002. Questions are also raised by the fact that fewer respondents said they enjoyed an income improvement in 2003 in comparison with 2002, 16.5 percent and 18.7 percent respectively. Those who declared that their financial situation remained stagnant in 2003 increased to 36.2 percent in 2003 from 27.2 percent in 2002. Additionally, 59.2 percent of households did balance their budgets in 2003 in comparison with 57.2 percent in 2002, while 26.8 percent in 2003 and 27.4 percent in 2002 turned to borrowing or using previously earned funds to cover expenses surpassing their income. Yet in 2003, 14 percent of households, from 15.5 percent in 2002, had lower expenses than incomes earned. The overall improvement in sentiment is due to a number of factors, notably regarding the cost of living. The difference between those who believed that the cost of living had increased greatly in relation to those who declared that it remained under control decreased from 55.8 percent in 2002 to 48 percent in 2003. It was the first time since 2000 that such a decline in the difference had been registered. It seems therefore that the small decline in inflation in 2003, mainly owing to the revaluation of the euro, had made itself felt. ICAP’s managing director, Dimitris Maniatakis, told Kathimerini that consumers’ improved acquaintance with the common currency helped matters further. Other factors leading to the improvement in households’ sentiment included the strengthening of the job market in 2003, especially in sectors related to the preparations for the Olympics, nominal wage increases over the inflation rate and the rebound of the stock market.