ECONOMY

Alogoskoufis makes rosy forecasts for next 3 years

Economy and Finance Minister Giorgos Alogoskoufis yesterday presented the updated Stability Program forecasts for the period to 2008. Eurozone members are required, according to the terms of the Stability and Growth Pact, to present updated medium-term forecasts on a number of major economic indicators. These forecasts are subject to the approval of the European Commission. Alogoskoufis said the figures will be submitted to the Commission next week. Greece’s updated program forecasts a high growth rate persisting over the next few years, reaching 3.8 percent in both 2006 and 2007 and accelerating to 4 percent in 2008. This high growth will be facilitated by the acceleration of growth in the eurozone, Alogoskoufis said, but will mainly be maintained by measures such as the new law in investment incentives, corporate tax cuts, the law on public-private partnerships, better management of public utilities, more privatizations, the reduction in overtime costs, more flexible working hours, the reform of bank employees’ auxiliary pension funds, the extension of shopping hours and the facilitation of opening new businesses. Average inflation will fall slightly, from 3.5 percent in 2005 to 3.2 percent in 2006, 3 percent in 2007 and 2.7 percent in 2008. The unemployment rate will drop from 10.4 percent in 2005 to 9.8 percent in 2006, 8.9 percent in 2007 and 8 percent in 2008. The controversial budget deficit figures are also set to decline from 4.3 percent of GDP in 2005 to 2.6 percent in 2006, 2.3 percent in 2007 and 1.7 percent in 2008. The European Commission has already contested the validity of the 2006 figure, forecasting a deficit equal to 3.5 percent of GDP, meaning Greece will violate the terms of its agreement with the other EU members, according to which it would cut the deficit below 3 percent of GDP in 2006. Economists said the government might have set itself overly ambitious targets while upcoming general elections – expected by early 2008 at the latest – might restrict its fiscal reforms. «The deficit figures appear to be slightly on the optimistic side given that 2007-2008 is an election period and therefore we don’t expect (Alogoskoufis) to reach the 1.7 percent target. But he should remain under the 3 percent threshold,» said Piraeus Bank economist Michalis Lambrianos. Finally, public debt is expected to drop from 107.9 percent in 2005 to 104.8 percent in 2006, 101.1 percent in 2007 and 96 percent in 2008. (Kathimerini/Reuters)