Q2 growth rate stays strong, investment signals uncertain
The Greek economy continued growing fast in the second quarter of 2004, posting a 3.9 percent growth rate in the gross domestic product (GDP) year-on-year, but down from 4.0 percent in the first quarter, the National Statistics Service (NSS) said in a release yesterday. Investment was also up by 3.9 percent, but down 8.2 percent in relation to the last quarter of 2003. This ambivalent performance on the investment front is seen as but one of economic indicators causing concern to ministers; two other characteristic examples are building activity, which has been steadily declining since the beginning of the year due to ample supply of housing, and retail sales, where growth has been halved. Ministers are now focusing attention on the preparation of two draft bills, on taxation and investment incentives, with a view to bolstering disposable incomes, consumption and investment. According to the NSS, consumption spending rose 3.3 percent and accounted for a 2.1 percent segment of the rise in total demand. In relation to the first quarter of the year, final consumption fell 1 percent. The 3.9 percent rise in investment year-on-year accounted for 0.8 percent of the rise in total demand. The respective rate in the second quarter of 2003 was 11.6 percent. Exports, in contrast to investment and after a long declining trend, rebounded by 5.4 percent year-on-year, augmenting its contribution to a 0.9 percent segment in the rise of total demand. The increase in exports was 14.4 percent in relation to the first quarter, when there was a 6.5 percent drop. Imports edged up 0.75 percent year-on-year and 0.1 percent in relation to the first quarter. Despite the marginal slowdown in the first quarter, Greece retains the highest growth rates in the eurozone. The Bank of Greece has said it expects growth of around four percent for 2004. Inflation Consumer inflation edged up to 2.9 percent year-on-year in July from 2.8 percent in June, with the rise smaller than expected, according to the NSS. The small rise is attributed to a shorter sales period this year and a rise in fuel costs. Manolis Kontopyrakis, secretary-general of the NSS, said the trend seems to be downward, although a degree of uncertainty arises from fuel prices. “I estimate the annual average consumer inflation for this year significantly below 3.5 percent. If there is restraint in service costs, inflation could come to 3.0-3.2 percent,» he said. However, industrial producer prices rose 4.6 percent in June, year-on-year, indicating relatively strong inflationary pressures. The rise was 4.4 percent for the domestic market, 5.2 percent for the external market and steepest for energy goods. The respective rises for June in the two previous years were 1.1 percent and 0.8 percent. The general index of producer prices was down 0.4 percent in June in relation to May, while the average for the 12 months to June was up 2.3 percent. The Bank of Greece has forecast a 3.5 percent inflation rate by year-end. Deficit Kontopyrakis said the ongoing process of calculating the exact size of public deficits for 2003 now shows the shortfall at 3.7 percent of GDP and likely to rise to 4 percent. He said public utilities, notably hospitals, had been accounted with a total surplus of 506 million euros, but is now found to be 100 million less.