Assessment and Recommendations

Domestic demand remained the main engine of activity in 2001, boosted by low nominal and real interest rates, buoyant consumer confidence, large capital inflows under the EU’s Community Support Framework, and preparations for  the 2004 Olympic Games. Nevertheless, Greece did not entirely escape unscathed the global slowdown, and GDP was slowing markedly towards the end of the year, though the year-on-year growth rate, at 4.1 per cent, was the same as in the year 2000. Unemployment fell to a still-high 10½ per cent, but despite brisk output growth in 2001, total employment may have declined slightly. The strong gains in labour productivity were mainly attributable to the ongoing major restructuring of the Greek economy, and the rising capital-labour ratio. But there may be some upward bias in measured labour productivity, to the extent that the underrecording of immigrant labour inputs is not reflected in unrecorded output.