Report: Growth to outpace eurozone’s, jobless rate to fall

Greek economic growth will continue to outpace the eurozone this year despite signs that economic activity is cooling off, EFG Eurobank said yesterday, expecting a pickup in 2006. In its quarterly macroeconomic review, the bank forecast a deceleration in Greece’s real GDP growth to 3.4 percent this year from 4.7 in 2004 and forecast a slight acceleration to 3.6 percent in 2006. «Our forecasts for 2006 remain relatively upbeat on the back of recovering investment activity and a positive contribution from net exports,» EFG Eurobank said. «Yet stubbornly high world oil prices and further fiscal policy tightening to help lower the budget deficit to no more than 3 percent of GDP – in line with EU obligations – imply downside risks to our projections.» Strong private consumption and increased net exports are compensating for lower public investment and a softer post-Olympics business sentiment this year, helping to keep the economy resilient. Consumer inflation, which was running at a 3.7 percent annual clip in August, may head higher given stubbornly high oil prices and structural rigidities that hinder competition. It is projected to average 3.5 percent this year and 3.3 in 2006. «The expected moderation in public wage growth next year and the government’s increased emphasis on structural reforms leave scope for some reduction in the inflation differential with the rest of the euro area,» EFG said. Still, the differential will remain significant, with adverse implications on the country’s economic competitiveness. The bank also forecast that unemployment will fall to 8.9 percent in 2006 from 10.5 percent this year. (Reuters)