ECONOMY

2004 budget deficit seen over 6.1 pct, inflation pressures possibly easing

The Greek budget deficit in 2004 is expected to top a previously announced 6.1 percent of gross domestic product (GDP) due to the inclusion of additional hospital and Olympic-related spending, the country’s statistics head said yesterday. Massive revisions to Greek budget data showed it broke the EU’s 3.0 percent deficit cap every year since 1997. «We will send final figures to Eurostat at end-June or early July. It is possible we will see a 0.2-0.3 percentage point increase in the 2004 (budget) deficit,» Manolis Kontopyrakis, National Statistics Service (NSS) head, told reporters. The government is targeting a deficit of 3.5 percent this year and 2.8 percent in 2006, having been given a 2006 deadline by EU finance ministers to bring its deficit to below the EU cap. Kontopyrakis also said inflation slowed to 3.2 percent year-on-year in May and is expected to pick up slightly in June. «The fall in May inflation was due in part to the small drop in fuel prices compared with the previous month,» he said. Kontopyrakis also revised down his estimate for 2005 average inflation to 3.2-3.3 percent from a 3.5 percent forecast last month if oil prices remain steady. However, economists said the outlook will hinge on volatile fresh produce and fuel prices. «It seems average inflation in 2005 may be lower than initially expected due to the milder than previously thought inflationary impact of recent hikes in value-added and excise taxes,» said economist Platon Monokroussos at EFG Eurobank. Alpha Bank economist Dimitrios Maroulis cautioned on the impact of volatile fresh produce and energy prices. «It is possible average annual inflation in 2005 could come in lower than 3.4 percent due to the slowdown in May inflation on the back of cheaper vegetables and fuel. But it is too early to see a trend,» he said. The consumer price index eased to an average of 2.9 percent in 2004 from 3.5 percent in the previous year, the lowest level in five years. (Reuters)