ECONOMY

Less rosy forecasts on Greek economy

While the Greek government continues to issue upbeat growth forecasts – 4.1 percent this year, 3.8-percent in 2002 – international organizations have announced less optimistic predictions. The International Monetary Fund (IMF) in its review of the Greek economy released yesterday, saw more downside as it predicted a 4-percent output rate this year, sliding to 3 percent in 2002. Unveiling its autumn economic forecast for the region for 2001-2003 yesterday, the European Commission said that Greece is set to grow by 4.1 percent and 3.5 percent in 2001 and 2002 respectively. A day earlier, the Paris-based Organization for Economic Cooperation and Development bolstered the government’s position when it predicted growth rates of 3.9 percent this year and 4 percent for 2002. All three bodies said that the Greek economy will continue to steam ahead of the eurozone on the back of investment and spending linked to the 2004 Olympic Games, disbursements from the Third Community Support Framework and declining interest rates. The organizations, however, warned that the downside risks to the economy could intensify. The IMF singled out the repercussions on the Greek tourism industry and, by implication, the economy should the travel crisis extend to next year. It said that a tight fiscal policy could promote both stabilization and growth. It urged the government to set expenditure ceilings. Referring to the 2002 budget, it said that growth assumptions are too optimistic and the 2001 surplus too marginal. Tax reductions could lose their impact as they are not offset by expenditure cuts. The organization also stressed the importance of social security reforms, calling it «the first priority» in the period ahead. The current global uncertainty resulted in a slew of more realistic economic projections for next year, notably the budget surplus, which is now estimated at 0.1 percent of Gross Domestic Product, down from an ambitious 0.5 percent, and the debt to GDP ratio, modified to 97.3 percent from 95.2 percent.