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Fourth Poverty Reduction Strategy Forum

This presentation outlines the economic developments in Greece, including GDP growth, industry and services growth, inflation rate, government deficit, trade deficit, unemployment rate, and future economic prospects.

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Fourth Poverty Reduction Strategy Forum

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  1. Fourth Poverty Reduction Strategy Forum Recent Progress in PRSP Implementation June 26-27, 2007, Athens, Greece

  2. CurrentEconomic Developments Presentation outline: • Economic developments in 2006 • Economic developments in Q1 2007 • Structural reforms • Future economic prospects

  3. Macroeconomicresults in 2006 • Real GDP growth of 3.2% • Industry growth of 3.6% • Services growth 3.2% • Average CPI inflation rate of 3.2% • Central government deficit of 0.6% • Trade deficit (20.5% in 2006) • Current account deficit of 0.4% of GDP • Foreign exchange reserves 4.5 months Import coverage • Unemployment rate 35.9 (ILO definition)

  4. GDP components

  5. Macroeconomic results in 2006 • However the MoF estimate for 2006 is 4% GDP growth • Reasons: • Annual GDP is calculated on the basis on the financial accounts, whereas quarterly data from surveys • Data inconsistency in some sectors (ex. Construction)

  6. Externalsector • Exportgrowth of 17.5% and import growth of 16.5% in 2006, • Trade deficit slightly increased to 20.5% of GDP • Stable remittances • Current account deficit of 0.4% - lower than expected due to non paid Telecom dividend • Foreign exchange reserves of 1.45 billions of Euro – 4.5 months of import coverage

  7. Employment- 2006 • Activity rate of 55.7% (ILO definition, Q4) • Employment rate 35.7% (4.3% growth), relatively high gender gap • Unemployment rate 35.9% (0.6 p.p decline), almost equally distributed between genders • New employed persons 150 000 in 2006 (2% more than 2005)

  8. Employed by sectors (Q4, 2006) Agriculture 17.6% Other19.8% Education&health 11.8% Manufacturing 24.6% Trans&comm. 5.8% Construction 6.0% Trade 14.4%

  9. Better than expected economic developments in the first months of 2007 • GDP growth for the first quater is 7% • Industry growth of 10% in the first four months of 2007 • Exports growth of 55% and imports growth of 36% for the first 4 months of 2007, as compared to the same period 2006 • Strong fiscal performance • Low inflation rate of 0,8%

  10. Reforms: Businessenvironment • Substantial reforms to reduce administrative burden on businesses and to ease market entry and exit • Entry: reduction of time and financial needs to register a business (effective one-stop shop system from January 2006) • Exit: facilitated by the new bankruptcy legislation from March 2006 that streamlined and shortened bankruptcy procedures and reduced their costs. • Regulatory guillotine - to eliminate all unnecessary regulations and procedures that are burden on businesses (involvement of business community, by September 2007)

  11. Reforms: BusinessEnvironment • Improvement of tax system: simplified tax administration (April, 2006) and introduction of flat and lower tax rates • Reform of social contributions system to simplify the system and to reduce tax wedge - harmonisation of basis for calculation and the minimum contribution base • Reforms in the Cadastre to ensure effective acquisition and application of ownership rights • Substantial judiciary reforms to improve its efficiency

  12. Reformsof the Judiciary Recent reforms • Significant attention to the fight against corruption (amendments to the Law on Corruption Prevention, new Law on Conflict of interests, adoption of the Law on Public Prosecution and the Law on Council of public prosecutors) • Laws on Litigations and Enforcement (private enforcement agents) • Non court mediation - already nominated 60 mediators • The Law on Judicial Council, May 2006 - already organised first elections and judges elected

  13. Labour market reforms • Improvement of labour market flexibility and streamlined • Government action towards reducing unemployment • further harmonisation with the EU acquis, • employment policy reforms towards more active concept of flexibilisation including active labour market policies, • greater security - the concept of flexicurity • micro level reforms to improve business environment and support job creation. • Policies and measures to reduce unemployment defined and coordinated in the following documents: • National StrategyforEmployment • National Action Plan for Employment 2006 -2008 • Operational Plan for Active Policies for 2007

  14. Reforms in the Public Finance Management Objectives: • To increase fiscal responsibility, accountability and transparency • To further improve budget planning and enforcement • To ensure a complete harmonisation and consistency of definitions with widely accepted international methodologies for fiscal planning and notification • Better coordination between the central and local governments • Reforms of the Budget process - focus on medium term budgeting • Tax administration reforms - to complete computerisation of data base in the Public Revenue Office, to ensure greater fiscalisation of businesses, to improve assessment and collection of taxes (established LTO)

  15. Reforms in the management of the Health sector • In the primary health care transformation was made of parts of the public health by privatizing pharmacies • In the hospital health care – management by two directors (professional and financial). Third training of healthcare managers was completed, attended by over 300 experts so far. • Clinical Centre reforms – transformation from a bulky structure, difficult to manage, into several legal entities. • Law on Health Insurance amended in terms of: • Transformation the role of the HIF from financing the healthcare infrastructure into a role of a buyer of healthcare services • Medical map was created

  16. Financial System Reforms • Banking system improvement through application of the Basel standards • Further enhancement of the NBRM capacity for implementation of monetary policy • Promotion of credit register of the NBRM connected with the relevant data bases • Introduction of modern techniques for managing the exchange reserves • Developing secondary market for public securities • Enabling the entry of foreign banks in a form of branch offices by 2008

  17. Education System Reforms • To provide education system that produces greater human capital with better quality • To ensure better alignment between education and labour market • Recent and ongoing reforms: • Changes in the curriculum (entrepreneurship, foreign languages, career guidance) • Changes in the examination system - unified external examination to improve education signals • Further reforms in the vocational education and training • Introduction of a compulsory upper secondary education to increase the quantity of human capital and to improve social inclusion • Implementation of Bologna process in higher education

  18. Future prospects 2007 - 2008 • GDP growth above potential (about 6%) • Imports growth of intermediate goods and equipment – 18% • Expected growth of credit to enterprises – 30% • Better than expected economic developments in the first quarter of 2007 (GDP growth 7% in Q1- almost in all sectors)

  19. Futureprospects • Low inflation rate between 2-3% (within the Maastricht criteria) • Exports growth of 12% (need to be revised) • Imports growth of 11% (need to be revised) • Employment growth of 4% • Unemployment to decline by 2 p.p per year • Slight widening of the trade deficit • Stable and low current account deficit

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