Rosy forecast for economy in 2003-2006

Greece yesterday forecast that it will have an average growth rate of 4 percent of GDP over the years 2003-2006 through the benevolent effects of investments, EU funding and increased tourism because of the Athens 2004 Olympics. This, of course, also depends on an upturn in the international economy, which international organizations believe is nearby. In the Revised Stability and Development Pact which it sent to Brussels yesterday, the government also sets out an alternative scenario for development, with an average growth rate of 3.3 percent, depending on the rate of the international economy’s recovery. Although the authors of the report did not take into account the country’s fiscal difficulties, they believe that the public debt can be reduced by 11.2 percent between 2003 and 2006. The forecast also sees inflation of 3.5 percent in 2003, dropping to 3 percent in 2004, 2.8 percent in 2005 and 2.6 percent in 2006. GDP growth is forecast at 4.2 percent in 2004, 4 percent in 2005 and 3.8 percent in 2006. Investments are expected to exceed 25 percent of GDP in 2003-06. The budget deficit is forecast at 1.2 percent of GDP in 2004 and 0.5 percent in 2005, with a slight surplus of 46 million euros in 2006. The public debt, which is expected to be at 101.7 percent of GDP, is expected to drop to 98.5 percent of GDP in 2004, 94.6 percent in 2005 and 90.5 percent in 2006. The forecast regarding employment is also very optimistic, with the jobless rate expected to be 9 percent in 2003, dropping to 8 percent in 2004, 7.4 percent in 2005 and 7 percent in 2006. The revised pact’s pessimistic scenario is based on a slower international recovery, which would have a negative effect on Greek exports and the trade balance. This would produce a 3.3 percent growth range over the four-year period and a slower drop in public debt, reaching 93.5 percent of GDP in 2006 (instead of the «optimistic» 90.5 percent). In the same year, a budget deficit of 0.5 percent could eat up the small surplus of the positive scenario.