Strong economic growth supports fiscal consolidation

Authors: Gikas Hardouvelis, Platon Monokrousos, Constantine Papadopoulos, Emmanuel Davradakis, Theodosios Sampaniotis
Publication: Greece Macro Monitor, Eurobank Research, Issue 5, November 2006

Greek GDP readings continue to surprise on the upside with the latest national account data recording a preliminary rise of 4.2% yoy over the first thee quarters of this year. We now see
full-year growth exceeding our previous forecast of 3.7% to reach 4.1% in 2006, with the slack created by a worsened net exports balance being more than counterweighed by higher domestic demand growth. Prospects for next year remain positive and we expect 2007 GDP to reach 3.7%.

The most recent official data on the 2006 budget execution reveal that authorities are on track to meet their full-year deficit target of 2.6% of GDP. As a result, this year’s budget outcome is likely to be in line with the Council’s recommendation under Article 104(9) of the Maastricht Treaty and an exit from the excessive deficit procedure appears likely in 1H 07.

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