Greece's GDP shrinks 6.2% in Q2 as slump seen to persist
Source: Agencies |
August 14, 2012, Tuesday
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GREECE'S economy shrank 6.2 percent annually in the second quarter, a slump that is expected to persist as the government scrambles to nail down billions in additional cuts to keep international bailout funds flowing.
Currently in its fifth consecutive year of economic depression, Greece is suffering record unemployment with nearly one in four Greeks without a job, undermining efforts to meet revenue targets and reduce the budge.
Athens is keen to convince eurozone partners and the International Monetary Fund of its will to bring an economic adjustment plan back on track before asking for changes and more time to spread out the pain of further cutbacks.
But the fiscal drag caused by the pursued austerity policies coupled with liquidity constraints and lingering uncertainty is likely to keep recessionary headwinds in full force.
"We project GDP to contract by 7.1 percent in 2012 and by 2.4 percent in 2013, on the back of further significant declines in disposable incomes, rising unemployment and plummeting investment activity," Eurobank economist Theodore Stamatiou said.
Greece's jobless rate has climbed to 23.1 percent, with nearly 55 percent of those aged 15-24 out of work, a desperate situation that fed into the popularity of anti-bailout parties in elections earlier this year.
The three-party coalition government that emerged after two rounds of polls is working to nail down 11.5 billion euros of savings and plans to revive a labor measure targeting 40,000 public servants for eventual dismissal.
Without the additional savings the government's budget will still show a primary deficit of 1 percent of GDP in 2014, well short of a targeted 4.5 percent surplus to help stabilize debt.
The second-quarter preliminary gross domestic product estimate, released by statistics service ELSTAT yesterday, was based on seasonally unadjusted data and follows a 6.5 percent GDP decline in the previous quarter.
Think tank IOBE expects the economy to shrink 6.9 percent this year, a bleaker outlook than estimates by the Bank of Greece and the OECD earlier this year, which project a contraction of 5.0 to 5.3 percent, respectively.
ELSTAT did not provide detailed estimates on the GDP components - consumption, capital investment, exports and imports - in the second quarter.
"It's not a major surprise, we knew the Greek economy was continuing to struggle but hopefully it's some sign that the rate of decline is starting to bottom out," said Chris Williamson, chief economist at London research firm Markit.
Greece is behind targets and structural reform benchmarks agreed with international lenders.
Currently in its fifth consecutive year of economic depression, Greece is suffering record unemployment with nearly one in four Greeks without a job, undermining efforts to meet revenue targets and reduce the budge.
Athens is keen to convince eurozone partners and the International Monetary Fund of its will to bring an economic adjustment plan back on track before asking for changes and more time to spread out the pain of further cutbacks.
But the fiscal drag caused by the pursued austerity policies coupled with liquidity constraints and lingering uncertainty is likely to keep recessionary headwinds in full force.
"We project GDP to contract by 7.1 percent in 2012 and by 2.4 percent in 2013, on the back of further significant declines in disposable incomes, rising unemployment and plummeting investment activity," Eurobank economist Theodore Stamatiou said.
Greece's jobless rate has climbed to 23.1 percent, with nearly 55 percent of those aged 15-24 out of work, a desperate situation that fed into the popularity of anti-bailout parties in elections earlier this year.
The three-party coalition government that emerged after two rounds of polls is working to nail down 11.5 billion euros of savings and plans to revive a labor measure targeting 40,000 public servants for eventual dismissal.
Without the additional savings the government's budget will still show a primary deficit of 1 percent of GDP in 2014, well short of a targeted 4.5 percent surplus to help stabilize debt.
The second-quarter preliminary gross domestic product estimate, released by statistics service ELSTAT yesterday, was based on seasonally unadjusted data and follows a 6.5 percent GDP decline in the previous quarter.
Think tank IOBE expects the economy to shrink 6.9 percent this year, a bleaker outlook than estimates by the Bank of Greece and the OECD earlier this year, which project a contraction of 5.0 to 5.3 percent, respectively.
ELSTAT did not provide detailed estimates on the GDP components - consumption, capital investment, exports and imports - in the second quarter.
"It's not a major surprise, we knew the Greek economy was continuing to struggle but hopefully it's some sign that the rate of decline is starting to bottom out," said Chris Williamson, chief economist at London research firm Markit.
Greece is behind targets and structural reform benchmarks agreed with international lenders.
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