ECONOMY

Macroeconomic targets revised

The government yesterday revised its growth and inflation projections for the Greek economy this year and next, citing unfavorable domestic and international developments. «I have given instructions for a revision of the forecasts in the Stability and Growth Pact (SGP) for 2008-2010… taking into account the changes in the world economy and the new collective pay pact,» Economy and Finance Minister Giorgos Alogoskoufis told reporters. He said the impact on the budget gap would be «insignificant» but considerable as regards inflation. Based on an updated SGP released in December 2007, Greece was projecting that its economy would expand by 4.0 percent this year and in 2009. It estimated inflation would average 2.8 percent in 2008 and in 2009. The growth rate is seen as falling to 3.6 percent this year and 2009, and nudging up to 3.8 percent in 2010. The new estimates now also see consumer inflation averaging out at 3.5 percent this year, up from a previously forecast 2.8 percent. «Our 2008 projection for oil prices is now at $90 to $100 a barrel. On the euro-dollar exchange rate (the estimate) was 1.42 and now becomes 1.47,» the minister said. «The rise in the CPI is mainly due to imported inflation because of increases in the price of oil, foods and other commodities… but also of the higher cost of labor, resulting from the new collective pay pact,» said Alogoskoufis. Incomes policy He said the real average wage is seen as rising 4 percent this year, against 2.4 percent in the former SGP. Alogoskoufis also set out the government’s incomes policy for civil servants this year. Public sector workers will get a pay increase of 4.5 percent with public sector pensioners getting a 5.0 percent rise. This is less than private sector workers will get based on a deal with employers last week, providing for cumulative pay rises of 12 percent over two years. Alogoskoufis said slower economic growth will mean unemployment will fall less than previously expected – to 7.5 percent rather than 6.8 percent. «Despite the revised projections, the Greek economy retains its momentum, thanks to reforms and private sector growth,» he said. «The revised projections appear to reflect more realistically the current state of the global economy,» said economist Nick Magginas at National Bank. «Meeting fiscal targets becomes more difficult.» Greece targets a budget deficit of 1.6 percent of gross domestic product this year, down from 2.8 percent in 2007. The government aims to balance the budget by 2010. (Kathimerini, Reuters)