Athens News Agency: News in English, 05-10-13

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

CONTENTS

[01] Bank of Greece presents interim monetary policy report

[01] Bank of Greece presents interim monetary policy report

The central bank's interim report on monetary policy in 2005, presented to parliament and the cabinet, stressed that Greek economy's problems could be dealt with efficiently through structural reforms, wage increases compatible with price stability, more efforts to restore fiscal balance and fiscal restructuring.

Consumer inflation is seen at 3.6-3.7 pct this year, while GDP growth at 3.5 pct, significantly above Euro zone's and EU's average growth rates.

The central bank's interim report forecast an increase in employment, mainly in the services sector, while unemployment rate fell -although it remained at high levels. The country's current accounts deficit, as a percentage of GDP, is expected to widen in 2005 due to higher energy costs and more interest payments and despite increase revenues from tourism and the shipping sector.

The Bank of Greece said that credit expansion growth to enterprises and households slowed in 2005, with bank loans to enterprises slowing to 6.6 pct in August from 8.6 pct in the fourth quarter of 2004 and the annual growth rate of loans to households easing to 24.7 pct in August from 28 pct in the fourth quarter of 2004. The report stressed, however, that households' loan debt as a percentage of GDP rose to 32.5 pct in August, from 30.9 pct in December 2004, although it remained low compared with a 50 pct rate in Euro zone.

The country's banking system is healthy and its stability is secured, the report stressed. Capital adequacy rates, profitability and cash flow are in very satisfactory levels, although the central bank warned of risks in maintaining high growth rates in credit expansion in the face of rising interest rates in the medium-term and the impact on households' revenues from any slowdown in economic growth rates.

The report urged domestic banks to maintain strict criteria in the credit policies and households to be more careful in taking over more debt.

The central bank stressed that restoring fiscal balance, fiscal restructuring and ensuring price stability to boost productivity were "key preconditions" to strengthen Greek competitiveness, maintain high growth rates and boost employment.

The Bank of Greece urged for continued efforts on fiscal adjustment, with a permanent further improvement of the country's fiscal condition resulting to significant primary surpluses in the coming years, containing primary spending and boosting revenues. Greece must achieve significant primary surpluses permanently to succeed in efforts to reduce its public debt to 60 pct of GDP by 2015 at the latest, at a time when pension spending are expected to increase -as a percentage of GDP - due to ageing population in the country.

The report stressed that a difference in the inflation rates between Greece and the Euro zone undermined Greek economic competitiveness and urged for more careful steps in wage increases. The central bank also said more competition was needed in products markets to ensure fair levels in profit margins.

Efforts for structural reforms must continue to strengthen the potential productivity growth rate and to ensure high long-term economic growth rates, the central bank said.

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