Greek economy is holding up

[Angelo]

Greek economy is holding up


The country's GDP is showing remarkable signs of resilience in the face ofhigh energy prices and financial market turmoil

HARRY PAPACHRISTOU

Rising energy prices drive Greeks to consume less fuel

THE GREEK economy is sputtering but not stalling. Gross domestic product (GDP) rose at an annual pace of 3.4 percent in the second quarter of this year, according to an initial estimate by the National Statistical Service that was announced on August 11. That may be the slowest economic growth rate in nine years, but it comfortably beats gloomier expectations and exceeds economic performance in the eurozone.

"It's a very satisfactory showing, if one considers the triple whammy that's currently hitting the European economy," said Alpha Bank economist Dimitris Maroulis in an interview with the Athens News.

Exorbitant oil prices, euro appreciation and the global financial meltdown are taking a much heavier toll on other European economies. Annual economic growth in the 15-nation eurozone stood at 2.1 percent in the first quarter. The European Central Bank said on August 7 that it expects European GDP growth for mid-2008 to be "substantially weaker'' than that.

Greek unemployment figures released separately on August 12 provide further ammunition for the optimists' camp. Joblessness literally took a nosedive in May, dropping to 6.6 percent from 7.7 percent in the same month last year. This is the lowest figure on record since the statistics agency started compiling monthly unemployment data four years ago.

Consumer spending, which unexpectedly shrank in the first quarter, has recovered somewhat in the second. It rose by 1.1 percent quarter-on-quarter and by 2.6 percent year-on-year. Luckily, high inflation (at 4.9 percent for a third straight month in July) seems to have led Greeks to curb consumption exactly where it benefits the economy most: imports.

Falling imports significantly boosted GDP. They dropped for a second quarter in a row, declining by an annual 3.8 percent, as rising energy prices led Greeks to consume less fuel.

"It's the first time that I have seen the volume of oil imports shrink in response to high energy prices," Maroulis said. Oil imports used to be insensitive to price changes, meaning that Greeks consumed the same amount of fuel and heating oil no matter how high the price was. That's apparently no longer the case.

The effect of rising energy prices on imports can also be linked to falling car sales. Registrations of new cars, buses and trucks declined by an annual 3.3 percent between January and July, the statistics agency said on August 5. By contrast, registrations of new motorbikes, which are cheaper to buy and consume less fuel, went up by 1.7 percent over the same period.

The moderately good GDP figures allow some breathing space for beleaguered Economy Minister George Alogoskoufis. "Given the conjuncture and despite its deceleration, the economic growth rate can't be considered as anything but satisfactory," he said on August 6, when he estimated that second-quarter GDP growth would be as low as 3.2 percent.

Frustrated so far in his efforts to boost net government receipts by an unprecedented 13 percent this year, Alogoskoufis needs economic growth, generating tax revenue, to help him get close to that target.

"There's tax evasion of at least 20 billion euros out there," said Maroulis. "Given the current economic growth, there is enough taxable income for the government to go after - provided it goes out at last to collect it."


ATHENS NEWS , 15/08/2008, page: A16
Article code: C13300A161



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