Brussels sees buoyant Greek growth prospects
Greece is expected to enjoy a robust growth rate over the next two years, far exceeding that of the eurozone, the European Commission said yesterday in its spring 2002 forecasts. The downside, however, is stubbornly high inflation, which is expected to hover above 3 percent, significantly exceeding the eurozone average, it warned. The semi-annual outlook forecasts Greek gross domestic product to grow by 3.7 percent this year and by 4.2 percent in 2003 against 1.4 percent and 2.9 percent respectively for the eurozone. It sees Greek inflation coming in at 3.6 percent this year and at 3.2 percent next year. Consumer price rises in the eurozone are estimated at 2.2 percent and 2 percent in 2002 and 2003 respectively. The Commission’s forecasts come close to the government’s GDP estimates contained in the updated stability and growth program. These placed national output growth at 3.8 percent this year and 4 percent in 2003. Harmonized inflation is estimated at 2.7 percent and 2.6 percent in 2002 and 2003 respectively. The EU’s projections are also far more optimistic than those of the International Monetary Fund, which in March predicted a 3-percent Greek growth rate this year. Strong investment activity is expected to fuel the Greek engine of growth over the next two years, the Commission said, citing the buoyant construction activity connected to the 2004 Olympic Games and private housing as one example. Furthermore, «public investment growth, supported by large inflows from EU structural funds and lower interest rates will also assist private investment,» it said. It noted that consumer spending will continue to grow, but at a slower pace due to the sluggish labor market and inflationary uncertainties. The Commission warned inflation is expected to stay above the 3-percent level this year and next because of opposing factors. Wage increases this year to compensate for higher-than-expected inflation in 2001 and strong economic growth will cancel out the benefits of an expected decline in oil prices and the stabilization of the euro exchange rate. On the general government balance, Brussels was more cautious with its conservative forecasts of 0.3 percent and 0.5 percent for 2002 and 2003 respectively. The official estimates are 0.8 percent of GDP this year and 1 percent in 2003, revised downward in line with the lower GDP growth forecast. Greece posted its first surplus in three decades last year on the back of the sales of third-generation mobile phone licenses. The Commission forecast on general government debt also diverged from Greek projections. It sees debt falling by a slower pace to 97.9 percent this year and to 95.2 percent in 2003 due to lower-than-expected budget revenues. The official forecasts are 97.3 percent and 94.4 percent respectively.
