Growth target may be trimmed
Bank of Greece Governor Giorgos Provopoulos indicated yesterday that Greece’s 3.5 percent targeted 2008 growth rate may be revised lower in coming months but added that economic fundamentals in the eurozone remain healthy. Recently appointed Provopoulos said Greece’s gross domestic product (GDP) is projected to expand by between 3.4 and 3.5 percent but added that a downward revision in the next two months cannot be ruled out. «The increase in domestic production activity continues to support exports and demand but less so than in 2007,» he told a meeting of industrialists’ union group SEV. «Despite the shocks of the last 12 months, the economic fundamentals of the eurozone as a whole remain healthy.» A slowdown in the global economy and rising inflation is seen as weighing on Greece’s economy, one of the fastest growing in the eurozone. Greek consumers are also feeling the pinch from adverse international economic conditions as inflation last month rose by almost 5 percent, due to increasing fuel and food costs. Provopoulos said the European Central Bank’s (ECB) recent rate hike, to a seven-year high of 4.25 percent, has already started to have a positive impact on inflation. «In the first days after the rate hike, the signs from the credit markets were that the rising trend in inflation expectations had been checked,» said Provopoulos, who is also a member of the ECB’s Governing Council. «This is a positive sign, however, it should not lead to complacency.» The ECB has indicated it will raise interest rates further to keep prices under control, even if there is a risk of the eurozone’s economy shrinking. The Bank of Greece head added that the extent and duration of negative impacts on economic growth from the turmoil in financial markets appear to be greater than first estimated.. [email protected]
