ECONOMY

3.5 pct growth seen

Greek economic growth will exceed 3.5 percent next year, continuing to outperform the eurozone and helping to reduce unemployment by a full percentage point, the government’s chief statistician said yesterday. Although Greece’s economy has been expanding at rates above 3 percent in the past years, unemployment remains high and is consistently identified as the top economic problem in opinion polls. In the second quarter, it fell to 9.6 from 10.4 percent. «With GDP growth above 3.5 percent, unemployment could fall to 9 percent next year from around 10 percent,» Manolis Kontopyrakis, general secretary of the country’s statistics service (NSS), told Reuters in an interview. «The forecast for unemployment is optimistic but we can achieve it,» he said. «We’re seeing steady employment growth in almost all sectors of the economy.» The government’s 2006 budget projects unemployment at 9.8 percent, with economic growth accelerating to 3.8 percent from 3.6 this year on stronger exports and domestic consumption. Inflation is projected at 3.2 percent. «The indications for 2006 are strong. We expect exports to keep rising by around 12 percent as in 2005; tourism will continue stronger, with residential construction and domestic consumption also helping,» Kontopyrakis said. He estimated that unemployment will fall to 9.9-10 percent in 2005 from 10.4 precent last year, citing job growth in tourism, mining and fishing. Greece has managed a soft landing after the 2004 Olympics, maintaining high growth rates despite a cut in public investment outlays and fiscal belt-tightening to reduce its budget deficit. Inflation above eurozone Apart from unemployment, Greece is also troubled by consumer inflation rates that have been consistently well above the eurozone average, a situation not expected to improve drastically next year. Analysts say the persistence of relatively higher inflation rates for years is hurting the economy’s competitiveness, contributing to low job growth. «The government’s target of a 3.2 percent average inflation rate for 2006 is feasible, if oil prices remain stable,» Kontopyrakis said. Although this would be an improvement on this year’s 3.5 percent average inflation, the gap with the rest of the eurozone will persist, mainly due to the higher impact of expensive fuels on Greek household budgets. «Greek households are spending more for oil as a percentage of their income than any others in the eurozone. This is the main reason for the big gap versus the eurozone,» Kontopyrakis said. «If we exclude oil from both (Greek and eurozone consumer price indices), Greece’s average inflation is only 0.3-0.4 percentage point higher than the eurozone’s,» he said.