ECONOMY

Gov’t upbeat on growth

The government is not revising upward its 3.8 percent target rate of economic growth for 2006, despite its considerable acceleration this year, Economy and Finance Minister Giorgos Alogoskoufis said yesterday. «The government’s policy is producing results in terms of both growth and employment, as well as dealing with external losses arising from increases in the price of oil,» he told a press briefing. Kathimerini has obtained a draft of the main points that economy ministers will hand over to Prime Minister Costas Karamanlis in view of his traditional keynote economic policy speech at the opening of the Thessaloniki International Fair early next month. These are as follows: First, the widely expected downturn in economic activity – even a recession – after the Olympic Games of 2004 did not materialize. This had been feared because the public sector had been the main engine for growth through investment leading up to the Games. This particular policy had led to an unprecedented swelling of fiscal deficits and a persistently high public debt. At the same time, public companies and organizations continued presenting high deficits that were routinely passed on to the taxpayer. Far from a recession, the economy continued growing at a fast pace despite a simultaneous drive to rein in fiscal deficits. The economy grew at a 3.7 percent clip in 2005 and accelerated to 4.1 percent in the first and second quarters of this year. Second, unemployment fell instead of rising. From 11.3 percent in the first quarter of 2004, it dropped to 9.7 percent two years later. Also, the economically active population has increased to 60.4 percent from 58.7 percent. Third, the fiscal deficit has fallen considerably, from 6.9 percent of gross domestic product (GDP) in 2004 to 4.5 percent last year. And, according to data for this year, the target of 2.6 percent for 2006 appears feasible. Already, the deficit is 29.2 percent down in the first half, year-on-year. Public debt is also expected to decline, from 109.3 percent of GDP in 2004 to 104.8 percent this year. Fourth, social cohesion is being strengthened. Households’ real disposable income rose by an average of 4.3 percent in the last two years. Real wages, above inflation, increased by 2.8 percent in 2004 and 2.9 percent in 2005. In contrast, in the 1998-2003 period, the average rate of growth of the real disposable income was no higher than 1.8 percent, despite relatively low oil prices.