ECONOMY

Minister remains upbeat on the economic fundamentals

Greece is poised for 4.5-percent growth this year, which is expected to edge up to 4.6 percent in 2002, National Economy Minister Yiannos Papantoniou said yesterday. A worse case scenario which takes into account the current global uncertainties, however, puts gross domestic product (GDP) growth next year at 4 percent. The minister said the revised 2001 projection, down from 5 percent in the stability and growth plan submitted to the European Commission last year and the 4.6- percent estimate issued last month, underscores the country’s resilience compared with other countries. The International Monetary Fund [IMF] has substantially downgraded its estimates of US and eurozone growth, reducing its projections by 75 percent for the former and 55 percent for the latter region. In contrast, the Greek revised figure is just 10 percent off the original projection, he told a press conference after submitting the draft budget to the parliamentary committee. Membership in the eurozone, continued strong domestic growth and a forecast budget surplus are expected to drive the Greek economy forward. Papantoniou nevertheless warned of the possibility of growth dipping below 4 percent next year should the current crisis drag on. Changes to the 2002 draft budget could also come after reviews of the Greek economy from the IMF, the Organization for Economic and Cooperative Development and the European Commission due by year-end. The final draft will be tabled in Parliament in early November. Official optimism over the goals of a 0.5-percent budget surplus and a fall in public debt to below 100 percent of GDP this year continued to remain unfazed despite the present uncertainties. Looking ahead, Papantoniou said the 2002 draft budget foresees a jump in the budget surplus to 1.3 percent of GDP and a fall in public debt to 95.2 percent of GDP. The improvement in public finances will come from slashing operational expenditures and reduced interest payments which should result in savings of 1.4 billion euros (480 billion drachmas). Calling the 4.5-percent output target for this year and 4.6 percent for 2002 over-optimistic projections, EFG Eurobank economist Platon Monokroussos said the 4- percent figure contained in the alternative scenario was a more realistic forecast in view of the global risks. My own estimate is for 4-percent growth this year, he said. He said the State’s emphasis on a budget surplus this year is an encouraging signal as it points to the government’s determination to proceed with further fiscal consolidation, at a time when a number of major eurozone countries have called for a relaxation of the stability and growth pact. The State has a good track record in meeting fiscal targets. It should not have a problem achieving a 0.5-percent budget surplus or bringing debt down to below 100 percent of GDP, Monokroussos said. Judging from the high output of growth achieved in the first half of the year, Greece should not have a problem meeting the 4.5-percent target either, said Dimitrios Maroulis, analyst at Alpha Bank’s economic research department. GDP growth in the first half of the year amounted to 5.5 percent which means growth in the second half must reach 3.4 percent, at least, to give 4.5 percent for the overall year, he said. With growth driven mainly by domestic factors – falling interest rates, declining inflation, strong investment and consumer spending – it would not be difficult for Greece to meet the goal, he said. The 2002 draft budget foresees a 7.8-percent rise in revenues. Net primary spending is estimated to increase by 5.9 percent and total expenditure in the regular budget by 2.7 percent. The state investment program is projected to rise by 9.7 percent. The economic projections are based on the assumption that the euro/dollar parity will stay in the 0.90 to 0.92 range and oil prices hover between $25 to $27.