NSS data show robust GDP, consumption growth

Last year was one of healthy growth and robust consumption, according to data released yesterday by the National Statistics Service (NSS). Gross domestic product (GDP) grew by 3.7 percent, confounding earlier predictions that this post-Olympic year would be one of growth limited to 2.5 percent, and vindicating the Economy and Finance Ministry, which had been on the defensive for a long time, justifying predictions once considered too optimistic. The high GDP growth should make it easier for the government to reduce the country’s debt and deficit levels in line with European Commission recommendations. Consumption, both private and public, even if fueled by credit, is the motor of growth: It grew 3.7 percent in 2005, down from 4.2 percent in 2004, the year of the Athens Olympics. Economy and Finance Ministry estimates for 2006 show private consumption growing at a 3.2 percent clip, compared with just 1.2 percent for public consumption. Credit growth for consumer and housing loans remained very high, at 38 percent, raising concerns at the Bank of Greece. Expected interest rate hikes by the European Central Bank this year are expected to dampen growth, however. NSS data show a slow, limited recovery in exports. Export growth in 2005 was 3.2 percent, compared to 11.57 percent in 2004. Export growth estimates for 2006 are slightly below 7 percent, but a lot will depend on how businesses respond to new incentives provided by the state. Exports have long been the Greek economy’s weak point. Imports declined 1.25 percent in 2005, a sharp turnabout after the 9.3 percent growth of 2004. They are expected to grow 4.9 percent in 2006. Investments shrank after two years of Olympics-fueled growth. In 2003, investments had risen 10.7 percent and grew another 5.7 percent in 2004. In 2005, they declined 1.6 percent. The government, which knows very well that investment creates income and jobs, hopes that cuts in corporate taxes, combined with incentives, will boost private investment.