16 September, 2004
The growth prospects of the Greek economy remain positive, although a slowdown is expected in 2005 since the rate of increase in investment expenditure will weaken compared to the high increase rates registered over the past two years, according to assessments made by National Bank analysts in the latest informative bulletin published on Wednesday.
The Greek economy continued to grow at a rate near 4.0 percent in the first half of 2004, fuelled mainly by strong private consumption, a buoyant shipping sector and the completion of the final preparations for the Olympic Games, the National Bank of Greece said in the report. The National Bank analysts believe the possibility of the further improvement of the Greek economy's growth prospects will depend on progress in the sector of structural changes, including the reshaping of the tax system, a decrease in the labor market's inflexibility, the taking of measures to boost enterprise and the promotion of new privatizations.
In its Economic and Market Analysis bulletin, issued by the strategic planning and research department, Greece's largest bank said that the shipping sector was taking advantage of the booming international commodities trade and the concomitant rise in freight charges, adding nearly 1.0 percentage point to activity in 2004 -an impressive boost that is unlikely to be repeated in 2005.
Tourism, on the other hand, albeit high appears to have failed to live up to expectations in this Olympic year, as the sector was extremely vulnerable to competition from neighboring countries and increased uncertainty internationally. Next year it should be better, the report said.
Growth is likely to slow to 3 - 3-1/2 percent in 2005 as the period of strong construction spending is coming to an end, both residential as well as public works, and the fiscal position tightens to meet the ceiling of the Stability and Growth Pact. Sizeable increases in real deposit income, with wage increases of around 3-1/2 percent in real terms, and rising household borrowing will continue to maintain private consumption in 2005, as it happened in 2004, the report said.
Investment growth is expected to remain broadly flat during 2005, with business investment and projects financed by EU structural funds -more than 19 billion euros being in the pipeline until 2007- partly offsetting the decline due to the end of the Olympic Games. Core inflation will remain near 3.5 percent due to strong domestic demand, high unit labor costs and second round effects from oil price hikes.
Progress on the implementation of structural reforms and large infrastructure projects will determine the ability of the economy to maintain a high growth rate, the report added.
Source: Athens News Agency