Greece's economic growth will slow during 2005 while inflation is set to rise, according to the governor of the Bank of Greece (BoG), Nicholas Garganas, who delivered an annual monetary policy report yesterday.

The BoG forecast that the country's gross domestic product will increase by 3.3 percent in 2005 from 3.8 percent last year. However, Garganas did not rule out the possibility that growth could be even slower because of economic uncertainty.

Garganas said that Greece's inflation rate will rise from 3 percent in 2004 to around 3.3 percent this year - well above the eurozone average. The country's budget deficit will remain high this year while the final figure for 2004 is almost certain to be greater than the government's current estimate of 5.3 percent of GDP, according to the report.

The governor also said Greece's social security problem needed to be solved, since it absorbs about 25 percent of GDP in government funds each year. Garganas said contributions from immigrants alone were not enough to solve the problem.