EVER since the restoration of Greek democracy in 1974, Greek governments, regardless of party, have seen economic development as their prime objective. That — and membership of the EU — has made for a very different economy from the one generally imagined by foreigners and promoted by the tourist industry — of sleepy fishing villages and timeless olive groves. Agriculture still plays a major role but there has been rapid and remarkable economic progress and it has enhanced Greece’s international status. Moreover, has been implementing a policy of privatizing major public enterprises, producing significant revenues for the state treasury. The privatization process is still ongoing.
Greece has been a member of the European Monetary Union since Jan. 1, 2001. On Jan. 1, 2002, Euro banknotes and coins went into circulation in Greece with the rest of the Euro Zone countries. Since March 1, 2002 the euro has been the only legal tender in Greece. Greece’s participation in the Euro Zone will further benefit the Greek economy, boost the country’s attractiveness as a destination for foreign investment, and secure a better future for the Greeks. Moreover, because of Greece’s role as a traditional, stable and reliable partner in the region, it should create opportunities for neighboring countries from the Middle East, the Balkans and Eastern Europe to strengthen their relationship with the single European market.
In 2003, the Greek economy continued to perform strongly, and the prospects for growth in the coming years is encouraging. The GDP growth rate for 2003 was 3.9 percent, while that for 2004 is estimated at 4.2 percent. Private consumption remained buoyant and investment spending remained strong, due to the financial flows from EU structural funds and preparations for the Olympics, accompanied by increased private investment.
The external sector deficit remained high, because revenues from tourism stagnated due to weak foreign demand and geopolitical uncertainties. Inflation continued to be higher than the EU average, while the unemployment rate saw a considerable reduction.
On the fiscal front, there was a small deviation from the government’s target, mainly due to the increased spending on the Olympic Games but also to increased expenditures for the compensation to families and businesses for the damage suffered from the natural disasters that took place in the first half of 2003. Debt continued to decelerate and is estimated to represent 101.7 percent of GDP at the end of the year. The Olympic Games that will take place in Athens in 2004 are expected to have significant positive effects on the economy, and particularly on tourism in the medium and long term. Moreover, as projects co-financed by the EU’s 3rd Community Support Framework of the EU become more mature, flows of European funds should help maintain a high level of activity, especially in the construction sector. The above factors, in combination with projected strong private consumption and investment should sustain a high level of economic activity over the coming years.
Furthermore, there are the reforms that have been introduced by the government. Most important are the further simplification of the tax system, the new system of controlling public expenditure, the continuation of the privatization of state assets, and reforms in the area of public administration. Such reforms are expected to have a positive impact on the performance of both the private and the public sectors and to enhance the productive potential of the Greek economy.
