Economy still unswayed by higher oil prices

Eurozone finance ministers (Eurogroup), meeting in Brussels yesterday, explored ways of how to deal with the impact of the recent steep rise in oil prices on inflation and the prospect of its likely continuation. Sources at Greece’s National Statistics Service (NSS), which is closely monitoring developments on the inflation front, have taken heart that so far there is no indication of a spillover from oil prices. In fact, the consumer price index is projected to close only 3 percent up for April, against 3.3 percent in March. This development is especially encouraging as the growth rate of gross domestic product (GDP) in the first quarter is expected to hold steady at around 3.5 percent and possibly reach 3.8 percent. The factors that seem to vouch for the maintenance of strong growth are construction activity and exports, which grew 5.1 percent and 22 percent respectively in the first two months of 2006, year-on-year. The Finance Ministry is forecasting a GDP growth rate of 3.8 percent this year, whereas the Bank of Greece is pointing at around 3.5 percent. To be sure, Greece’s pace of growth strongly depends on overall performance in the European Union, and in turn is dependent on oil prices. The 12 eurozone members have drawn up their 2006 budgets on the premise of the price of barrel of oil at $55. A downturn in growth in the rest of Europe is bound to affect Greek exports and, consequently, GDP. The European Commission is scheduled to release its spring report on the economies of member states, with projections for 2006, on Monday. According to sources, the forecasts for Greece will be more or less optimistic, without necessarily subscribing to the government’s confidence that it will succeed in bringing down public deficit to below the EU-prescribed ceiling of 3 percent of GDP (from 4.5 percent last year). Public revenues grew an estimated 12 percent in the January-April period, against an annual target of 6.5 percent. The rise in April is provisionally estimated at 1 percent. Deputy Finance Minister Antonis Bezas said, «April, the most difficult month of the year, has passed with minimal losses.»