ECONOMY

Commission predicts 3.5 pct growth for Greece this year

Greek economic growth is projected to increase by 3.5 percent this year, with high inflation and unemployment seen as two of the main problems, the European Commission predicted in its autumn economic forecast 2002-2004 for the eurozone and the European Union. The Commission’s economic data came a day after the National Statistics Service confirmed that the government was on track with its 3.8-percent growth target for this year, following moderate expansion in the third quarter. Brussels forecast 3.5 percent growth for Greece this year, the highest among EU countries. Its 3.9 percent estimate for 2003 and 3.7 percent for 2004 ranked Greece as the second-fastest growing economy in the region for the two years. In contrast, the eurozone is expected to expand by just 0.8 percent this year as Middle East uncertainties and sluggish stock markets weigh on countries. Growth is projected to recover to 1.8 percent in the following year. World GDP growth is seen at 2.6 percent this year and projected to improve to 4 percent in 2004. The key to Greece’s above-average growth is its strong capital spending, linked to infrastructure projects financed by community funds on the one hand and related to the 2004 Olympic Games on the other. Capital spending is expected to grow by 6.2 percent this year, 6.5 percent the year after and slow to 5.5 percent in 2004. Despite higher-than-average economic activity, Greek unemployment will continue to be a problem, with the projected 9.9 percent rate for this year the second highest in the EU. The unemployment rate is not expected to fall below 9 percent in the next two years. At 9.4 percent and 9.1 percent in 2003 and 2004 respectively, the two figures are the second highest in the region. Stubbornly high inflation is another problem that is expected to plague Greece this year and for the next two years. Brussels’s forecast of 3.8 percent placed Greek inflation 150 basis points above the eurozone average this year and 50 basis points above the Greek government’s target. Inflation is expected to ease to 3.2 percent in 2003 and edge up to 3.3 percent the year after, substantially higher than the 2 percent and 1.8 percent estimated for the eurozone. On Greek public finances, Brussels said it expected general government gross debt next year to amount to 102 percent of gross domestic product, declining to 98.5 percent only in 2004. The Greek Finance Ministry last month revised downward its debt/GDP ratio target to 100.2 percent for 2003 after Eurostat, the EU statistical agency, included capital transfers and issues of share-convertible bonds as part of government debt. Eurostat yesterday confirmed the upward revision of the Greek government deficit and debt for 2000 and 2001 after discussions with Greek authorities last month.