ECONOMY

GDP grows at faster than expected pace during Q2

The economy continues to grow at a fast pace and growth may become even stronger if Greece improves its absorption of EU aid, according to government officials. During the second quarter of 2006, gross domestic product grew 4.1 percent from the same period in 2005, on the back of higher investment, itself reflecting higher industrial production, and continued strong private consumption. National Statistics Service (NSS) general secretary Manolis Kontopyrakis said that this was probably no mere blip and that GDP growth for 2006 may reach 3.9 or 4 percent, higher than forecast by the state’s own budget (3.8 percent) and by the Bank of Greece and the European Commission (3.5 percent). According to NSS data published yesterday, investment increased 14 percent on an annual basis in the second quarter and was given a boost by strong construction activity: Total construction activity was up 33.5 percent in May, while private construction activity rose 31.7 percent. Consumer spending grew 3.5 percent, but imports rose 6.6 percent while exports declined 0.7 percent. In June, industrial production was up 2.6 percent year-on-year, while two new measures introduced by the NSS confirm the strong recovery of the industrial sector: New orders were up 19 percent in May, while, in the same month, turnover was up 29 percent on May 2005. Economy Ministry officials said that growth could further accelerate if Greece could absorb available EU funds at a faster pace. From the Third Community Support Framework (CSF III) program, which officially ends this year, Greece has not absorbed funds totaling 19 billion euros. These will have to be absorbed by the end of 2008, while contracts for projects using these funds must be signed by the end of the year. However, the state has so far been ineffective in absorbing these funds and Economy Minister Giorgos Alogoskoufis has been making the rounds in Brussels trying to negotiate a solution, without so far convincing EU officials, notably Regional Policy Commissioner Danuta Hubner, to extend deadlines. CSF IV, the successor to CSF III, starts next year and will run until 2013. Greece secured 20.1 billion euros in earmarked EU funds, less than during CSF III, but a satisfactory amount, nonetheless, considering that, this time, the EU newcomers from poor Eastern Europe were competing for funds. Prime Minister Costas Karamanlis has pledged that 80 percent of these funds will be used for projects outside the Athens area.