IOBE sees slowdown, price woes
As the Athens stock exchange tumbled more than 4 percent yesterday, a report said that the growth of the Greek economy is expected to slow in 2008 due to weaker spending on investment and consumption. The quarterly report, prepared by the non-profit Foundation for Economic & Industrial Research (IOBE), said expansion of gross domestic product (GDP) is likely to slow to below 3.5 percent this year from 4 percent in 2007. «If the growth model that was supported by rising consumption cannot be maintained, it is obvious that new sources need to be found in order to support development in coming years,» the report said. «International uncertainty has increased and in Greece current forecasts are likely once again to be revised downward.» Greece’s economy has been one of the fastest growing in the eurozone in recent years but it is starting to lose steam, adversely affected by the slowdown in the global economy. Government sources said they expect the Finance Ministry to soon cut its GDP growth forecast of 3.6 percent, a figure that was revised lower in March. Inflation, which has been rising across the world due to galloping oil prices, is seen as being one of the key problems in the domestic economy due to the inefficient operation of markets. «Rising oil and food prices are creating inflationary pressures in the economy. But in Greece the impact is multiplied due to market distortions,» added IOBE. Inflation concerns were among the factors weighing on European bourses yesterday, as weak global equity sentiment dragged Greek stocks 4.4 percent lower. The prospect of rising interest rates also made investors nervous as the higher cost of borrowing may eat into corporate profits. Given the negative momentum that has dragged the Athens bourse 33 percent lower since the start of the year, experts warned of a further downside to stock prices. »A series of negative factors are affecting the market, including rising oil prices and the prospects of a rate hike,» said an analyst who declined to be named. »The negative sentiment remains and I can’t see it changing soon.»
