New revision for growth and inflation

The government continues to count the cost of the international crisis and is again ready to revise its forecasts for inflation and growth, just two months since the last revision. The Economy and Finance Ministry will also have to incorporate measures in support of financially weaker groups as well as spending cuts in order to keep the deficit lower than the 3 percent threshold. Exceeding this level would mean the launching of a fresh excessive deficit process by the European Union. According to a top ministry official, Economy and Finance Minister Giorgos Alogoskoufis will in the next few days ask for the revised data on inflation and growth so that the necessary adjustments to economic policy can be planned. The new estimates and adjustments will be announced in the draft budget in September. The same source revealed that the ministry will begin to regularly make public its estimates twice a year, just as the European Commission issues its spring and fall forecasts. In April, the ministry revised its growth estimate from 4 percent to 3.6 percent and raised its inflation forecast from 2.9 percent to 3.5 percent. Since then, oil and food prices have continued to soar and the estimates of the economic slowdown globally, as well as in the eurozone, have deteriorated further, thus necessitating a new revision in Greece. Experts such as former Bank of Greece governor Nicholas Garganas and the head of EFG Eurobank Economic Studies and Forecasts Division, Gikas Hardouvelis, agree that inflation will rise above 4 percent while growth will be pressured further. The execution of the budget has also been hit by major problems. In the first four months of the year, net revenues grew by just 3.7 percent, against an annual target of 13 percent. Alpha Bank estimates that «it does not appear likely now that the increase in net revenues can exceed 10 percent.» As for spending, it forecasts a rise of 10.5 percent. Against this background, Alogoskoufis must secure the resources for supporting those on low salaries and pensions who have been badly hit by the price rises, while keeping the budget on track as far as possible. He has said that the measures will target specific segments of society and be funded by the National Fund for Social Cohesion, whose resources have already been included in the budget.