ECONOMY

Higher investment spending is key to growth next year

Greece said yesterday it plans to boost growth next year by 4.1 percent with a hefty boost in investment spending and a check on consumption spending. Presenting a draft of the 2003 budget, Economy and Finance Minister Nikos Christodoulakis said the fiscal program aims «to reinforce growth.» «The 2003 budget is strongly growth-oriented,» he said. He said growth would come principally from significantly increased public investment spending, which is projected to rise by 13 percent next year from 5.2 percent this year and contribute to 2.2 percent of national output. Robust consumer spending is expected to account for 1 percent of GDP growth in 2003, while community funds should contribute 0.9 percent. Christodoulakis said this year’s growth target of 3.8 percent remained on track despite lower forecasts from the Bank of Greece and international organizations. On the other pillar of next year’s budget, he said the government aims to cut back expenditure, with primary spending projected to increase by 6.3 percent, down from 8.4 percent this year. He said the ax will fall on consumption expenditure, expected to shrink by 7 percent. He said Greece expects to post a budget surplus this year and next, though sharply lower than originally planned. The feat would make the country one of eight states in the eurozone able to put their houses in order even before the 2004 deadline, which was unexpectedly pushed back to 2006 by the European Commission on Tuesday. Christodoulakis said the budget surplus in 2003 is projected at 0.5 percent, down from a targeted 1 percent, while that for this year is due to decline to 0.4 percent from 0.8 percent. The lower estimate for this year came after a one-off compensation payout related to a series of natural disasters this year, higher tax returns and additional interest payments as well as increased health spending, which added a hefty 1,230 million euros to this year’s spending. Christodoulakis said the focus next year will be on bringing public debt down to below 100 percent of GDP. Plans to slash the debt-to-GDP ratio to below 100 percent this year went off course after Eurostat, the EU statistical office, ruled against using securitization revenues to trim public debt. The debt-to-GDP ratio this year is estimated at 103.2 percent. Christodoulakis said privatization revenues and not earnings from securitization operations, will be the key to reducing public debt next year. The divestment program to date has raised 2.48 billion euros, amounting to 1.5 percent of GDP, for the State. He said the program next year will diverge from the customary practice of equity sales. The 2003 budget foresees inflation easing to 2.5 percent, not taking into account the fallout from a war against Iraq. Consumer prices are officially expected to rise by an average of 3.3 percent this year.