Economy is slowing down and experts say estimates are risky

The growth rate of the Greek economy is slowing down and officials at the Economy and Finance Ministry are still unsure where the new equilibrium point will be. The issue was discussed yesterday at length at the ministry’s Council of Economic Experts. The consensus emerging was that the growth estimates for 2002 and 2003 (3.8 percent and 4.1 percent of GDP, respectively) will have to be revised downward, but that any forecast at the moment contains serious risk elements. Economy and Finance Minister Nikos Christodoulakis is expected to admit, at least indirectly, during today’s first day of debate on the 2003 draft budget in the Parliament’s Economic committee, that economic growth will not be as fast as previously estimated. Christodoulakis yesterday met with Bank of Greece governor Nicholas Garganas, who has repeatedly warned of the need for a faster pace of economic reform, and has pointed to the danger posed by continuing high inflation. Garganas is said to have briefed Christodoulakis on the central bank’s fresh growth and inflation estimates, which will be part of the soon-to-be-published interim report on the economy. The main reason for the downward revision of growth, and the upward revision of inflation, is the continuing global economic slowdown that now threatens to mutate into a full-blown recession. The estimates and forecasts of international economic organizations have repeatedly been proven erroneous in recent years, exacerbating the uncertainty concerning the development of the Greek economy in the next few years. This uncertainty is exacerbated further by unfavorable developments on the fiscal front, with Greece – and other EU countries – under the spotlight for its «creative accounting» practices of the recent past. Eurostat, the EU’s statistical service, has already obliged Greece to revise its debt by 6 percentage points, from 99 percent to over 105 percent of GDP, and the scrutiny of Greek practices is still going on. Nikos Karavitis, head of the National Statistics Service, who once was forced to withdraw statistics on unemployment because the survey was incomplete, is in constant consultation with Eurostat, trying to convince it of the legitimacy of Greece’s accounts. Economy Ministry officials estimate that the economy will grow 3.6 percent in 2002, instead of 3.8 percent. For 2003, the 4.1 percent estimate may be revised downward to 3.5 percent or even lower. Much will depend on oil prices. In early December, Greece will have to submit its revised Stability Pact estimates for the coming three years. At the moment, establishing these estimates is a difficult task. A first indication of them will be included in the finalized 2003 budget, which will be submitted to Parliament at the end of November.