Athens News Agency: News in English, 08-02-20

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From: The Athens News Agency at <http://www.ana.gr/>

CONTENTS

[01] BoG sees limited slowdown in '08

[01] BoG sees limited slowdown in '08

The report, submitted to Parliament President Dimitris Sioufas on Wednesday, was presented by Nikos Garganas, the central bank's governor.

The Greek central banker recommended self-restrain in wage increases, saying a loss of income resulting from skyrocketing oil prices could not be counterbalanced with equal nominal wage increases, since it would further undermine Greek households' purchasing power.

Garganas expressed, however, his concern for poverty and social inequities in the country, urging constant reforms to combat such phenomena. The central banker declined to comment on the government's proposals to reforming the social insurance system, saying he was waiting for the government's final draft legislation. He noted, however, that the current system was unfair and ineffective.

The Bank of Greece, in its report on monetary policy, said the country's GDP was expected to rise by 3.7 pct this year, from 4.0 pct in 2007, although he did not exclude a growth rate below 3.7 pct due to increased international uncertainties.

"Times are difficult for economic forecasts," he said. Garganas added that economic growth would be based mainly on domestic consumption, while the external balance of payments would have a negative impact, with the current accounts deficit expected to surpass 14.0 pct of GDP.

The central bank expects the inflation rate to rise further this year, to 3.4 pct, from 3.0 pct in 2007, reflecting higher international oil prices, while the domestic labour cost per unit product ratio is projected to remain above the Eurozone average.

The report said a higher Greek inflation has led to a decline in the country's international competitiveness in the seven-year period from 2001 to 2007, with consumer prices up 15 percent in Greece, compared with its main trade partners, while the labour cost per unit product rose by 19 pct in the economy in general and by 41 percent in manufacturing. The central bank said the decline in international competitiveness was responsible for the jump of the current accounts deficit to record levels in 2007.

Garganas urged that trade imbalances should become the focus of economic policy in the country. Commenting on domestic fiscal developments, the central banker said a fiscal consolidation drive would need long-term efforts to achieve a significant primary surplus ensuring a decline in public debt -the second largest in the EU.

Commenting on the impact of a global crisis on the domestic banking system, Garganas said it remained limited and indirect. However, he underlined the need to further cut non-performing bank loan rates to 3.5 pct of outstanding loans, from 5.0 pct currently. The report said that borrowing debt of Greek households remained low (45.3 pct of GDP) compared with the EU average rate (60.4 pct).

Caption: Bank of Greece Gov. Nikos Garganas appears at a press conference in Athens on Wednesday, Feb. 20, 2008. ANA-MPA / P. SAITAS

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