Inflation is still too high

Greek inflation may ease a touch in April but will still exceed the eurozone average by more than 1.5 percentage points and will pose a continuing threat to the country’s economic competitiveness, analysts said yesterday. They forecast headline inflation to ease to 3.8-3.9 percent year-on-year in April from 4.0 percent in March, with opinion split as to the impact of energy and fresh fruit and vegetable prices on the consumer price basket. Economist Alexander Matzaris at Alpha Bank said April consumer prices largely escaped upward pressures from Easter bonus payments, which were paid later in the month than normal. «Inflation is expected to ease to around 3.8 percent. The later-than-normal payment of the Easter bonus chopped 0.3 percentage points off the consumer price index,» he said. Bank of Greece governor Lucas Papademos, who is headed for the European Central Bank, said this week that April inflation would range around March levels, warning that its persistence threatened the economy’s global competitiveness. Greece is no longer able to rely on currency weakness to offset rising consumer prices after it became the eurozone’s newest member in January last year. The National Statistics Service (NSS) is due to announce April’s headline and EU-harmonized inflation figures on May 10. Greece’s EU-harmonized inflation – the figure used by the European Union in its calculations – accelerated to 4.4 percent in March, the eurozone’s second-highest after Ireland. Eurozone inflation is seen slowing to 2.2 percent in April from 2.5 percent in March. Economists saw no immediate letup from higher food costs after a wave of bad weather earlier this year, which pushed fresh fruit and vegetable prices to record-high levels. «Food price inflation in Greece has remained very high, but this is a temporary factor. We expect this to normalize in the short term,» said economist Klaus Baader at Lehman Brothers. He sees April inflation easing to 3.9 percent in April. Fresh tomato prices at groceries were up about 70 percent year-on-year at the end of March, but they have started to ease in the last few days due to warmer weather. National Bank economist Paul Mylonas expects April headline inflation will be close to 4.0 percent, with core inflation remaining unchanged at 3.5 percent. The NSS does not officially provide core inflation data. Prime Minister Costas Simitis conferred yesterday with Education Minister Petros Efthymiou to discuss ongoing ministry programs and the ministry’s participation in the government’s National Plan on Employment.