ECONOMY

Economic sentiment holds good

Economic sentiment in September remained unshaken in the immediate aftermath of the September 11 attacks on the USA, private think tank the Foundation for Economic and Industrial Research (IOBE) said yesterday. It warned, however, that continuing uncertainty could take its toll on manufacturing and retail confidence in the coming months. IOBE said its survey of some 1,500 companies between 10 to 28 September showed that Greek businesses reacted calmly to the attacks on the USA on September 11. In comparison, a number of European Union countries such as France and Sweden have reported a severe dent in economic sentiment after the attacks on the USA. Economic sentiment, however, could worsen in the coming months, especially if uncertainty persists, the think tank stressed. Economists said there is a sound basis for IOBE’s warning of a possible deterioration in economic sentiment in the ensuing months. The overall picture shows a positive development probably because companies had yet to grasp the extent of the global slowdown during the period of the survey, said EFG Eurobank Ergasias economist Platon Monokroussos. I would not place much significance in the September index, he said. With most of the signs pointing to a deterioration ahead, economic sentiment is set to worsen, he argued. Discounting the reaction to the September 11 attacks, economic sentiment in Greece has shown a gradual deterioration in recent months although the decline has been less evident than in the eurozone, IOBE said. The Greek business sentiment index in the third quarter of the year dropped to 101.8 from 102.1 in the previous quarter, while the eurozone index fell by a bigger margin, from 101.6 to 100.3. Monokroussos said this favorable development vis-a-vis the eurozone should not, however, be taken as a sign by companies to relax their vigilance. Schroder Salomon Smith Barney economist Miranda Xafa was similarly pessimistic over the economic outlook for the future. The economy could be significantly affected by the tourism downturn, she said. With tourism accounting for some 7 percent of gross domestic product, a 15-percent drop in receipts could cut output growth by 1 percent, she argued. We have heard of cancellations in the region of 14 to 16 percent from travel agents and hoteliers. If this continues, it could hurt the economy. Economic sentiment in manufacturing appeared to be more optimistic than in the construction and retail trade, IOBE said. While the manufacturing index rose by nearly 5 percentage points to 107 points in September on the back of a projected surge in demand and the liquidation of stocks, the construction indicator posted a sharp fall as companies see less work ahead due principally to the delays in public projects. With stocks piling up and sales slowing down, retail traders had reason enough to be glum. This was evident in the sharp fall in business sentiment. But the sector said an expected increase in suppliers’ orders and jobs could improve the medium-term outlook.