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Greek economy grows in second quarter but strong rebound elusive

Greek flag flutters in the wind as tourists visit the archaeological site of the Acropolis hill in Athens, Greece

Greece’s economy grew modestly in the second quarter but weak demand and scant investment mean a strong rebound after years of recession remains elusive a year after the country nearly crashed out of the euro.

Data released on Monday showed the €176bn economy expanded by 0.2 per cent in April to June, slightly less than a previous estimate of 0.3 per cent due to weaker consumer spending and net exports. It was the first quarter-on-quarter expansion since late 2015 and followed a 0.2 per cent contraction in Q1.

Facing a second bailout review entailing an unpopular loosening of labour laws in the autumn, Athens is keen to show a fatigued electorate that painful taxation and pension cuts that came with last year’s €86bn bailout deal will bear fruit and lead to economic recovery.

But kickstarting growth to bring down an unemployment rate of nearly 24 per cent, the highest in the eurozone, is a challenge as a fiscal straight jacket to attain budget surpluses of 3.5 per cent of economic output weighs on economic activity.

Jaded by years of austerity, Greeks were unimpressed by Monday’s figures.

“The GDP turnaround in the second quarter doesn’t mean a thing for us in retail trade, there is no liquidity in the market,” said Antonis Papadakis, 60, a clothing wholesaler who has seen his sales fall 70 per cent during the debt crisis years.

The data showed Greece’s economy shrank 0.9 per cent on an annual basis in the second quarter, more than a flash estimate of -0.7 per cent, with economists expecting a mild recession for the year as a whole.

“We had a downward revision but it is encouraging that GDP recorded positive growth on a quarterly basis,” said Eurobank economist Platon Monokroussos.

“Overall, a milder than initially expected contraction in the first half points to a full year GDP decline of close to 0.5 per cent or slightly better.”

The European Commission and Greece’s central bank project a 0.3 per cent economic contraction this year while the OECD sees a milder 0.2 per cent decline. Rating agencies Moody’s and S&P are more pessimistic, expecting the economy to shrink 0.7 per cent and 1.0 per cent respectively.

The EU sees the economy rebounding by 2.7 per cent in 2017.

Looking at the components of gross domestic product, the year-on-year decline in economic output was due to a further weakening of private consumption and a slightly negative contribution from net exports.

Consumption declined 0.2 per cent in the second quarter from Q1 and by 1.9 per cent year-on-year. Imports fell 0.4 per cent and exports decreased by 1.0 per cent, while gross capital formation increased 1.0 per cent from the previous quarter.

“Despite the revision, the figures are in line with expectations for a recovery in the second half of the year, unless there is a further slump in private consumption,” said National Bank economist Nikos Magginas.

For others, the small pickup in growth may be too little, too late. “What rebound? I’m ready to kill myself,” said Tassos Sidiropoulos, a street vendor selling dry nuts in central Athens.

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