Cyprus Mail

Greece, in recession again last year, eyes recovery in 2017-18

File photo: People make their way on main Syntagma square as the parliament building is seen in the background, in Athens

Greece fell into recession again last year, confounding its international creditors who had predicted some growth after years of budget austerity and bailouts.

The country’s leading economic think tank, meanwhile, said there would be growth this year – but not as much as the government expects.

The economy contracted by 0.2 per cent in 2016, statistics service Elstat said on Tuesday, releasing its revised estimate of full-year gross domestic product.

Elstat’s estimate, based on seasonally unadjusted data, was based on lower than previously estimated household consumption, suggesting that the eurozone’s largest unemployment rate is still holding back broader recovery.

It said gross domestic product in volume terms and measured at constant prices was €175.9 billion last year, down from €178.1 billion in 2015. Consumption dropped by an annual 0.3 per cent, versus a 0.6 per cent rise estimated by the agency in March.

“It’s a small change that has minor impact on other indices and on fiscal figures. It is a slightly weaker depiction of the real economy in 2016 due to the downwardly revised consumption expenditure,” said National Bank economist Nikos Magginas.

He said that the registered trend in consumption would also be a challenge for 2017.

Years of austerity imposed by the International Monetary Fund and eurozone lenders in exchange for bailouts have made many Greeks far poorer and shrunk consumption accordingly.

The European Commission, in its winter forecast published in February, projected GDP growth of 0.3 per cent in 2016 while the International Monetary Fund’s upwardly revised estimate saw GDP growth of 0.4 per cent.

Greece‘s leading IOBE think tank said on Tuesday the economy will expand by “slightly below” 1.5 per cent this year and pick up to around 2 per cent in 2018.

“The Greek economy’s growth rate in 2017 will be in the area of 1.3 per cent, slower than was previously projected. Next year, growth will most likely accelerate to 2.0 per cent or slightly higher,” IOBE said in its quarterly review.

The think tank’s projections are below government forecasts. The government, which faces a third review to its international bailout this autumn, has cut this year’s economic growth estimate to 1.8 per cent from 2.7 per cent in May.

The Commission has also cut its forecast to 2.1 per cent from 2.7 per cent. Greece‘s central bank sees gross domestic product growing by 1.7 per cent this year and picking up to 2.4 per cent in 2018.

Economic recovery will be key to bringing down a jobless rate of 21 per cent, the highest in the euro zone, and attaining a primary budget surplus of 1.75 per cent – excluding debt servicing outlays – this year as demanded by Greece‘s creditors.

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