Greek recession deepens in 2010, outlook weak
Tue Feb 15, 2011 7:16am EST
* Q4 GDP contracted 6.6 pct y/y, more than expected
* 2010 GDP slumped 4.52 pct
* No strong recovery seen after 2011
* Central bank sees GDP shrinking 3 pct or more in 2011
(Combines central bank report, GDP data, adds comment)
By George Georgiopoulos
ATHENS, Feb 15 (Reuters) - Greece's economy slumped more
than expected last year and will stay in recession for a third
straight year in 2011 with economists seeing little hope for a
strong recovery even after that.
The 230 billion euro economy shrank at an annual 6.6 percent
pace in the last quarter of 2010, as the austerity-induced
recession deepened from a revised 5.7 percent decline in the
previous quarter, data showed on Tuesday.
Flash Eurostat estimates showed the downturn in economic
activity for the whole of 2010 was 4.52 percent, worse than the
government's forecast decline of 4.2 percent, as it struggled to
cut deficits and tackle debt.
Athens has been forced to impose stringent austerity
measures as a condition of the 110 billion euro bailout it
agreed with the European Union and International Monetary Fund
last May to try to solve its debt crisis.
The government projects GDP will decline 3.0 percent this
year but sees light at the end of the tunnel, saying the first
signs of growth will appear towards the end of the year. The
central bank forecast in a monetary policy report on Tuesday
that GDP may shrink by 3 percent or more in 2011.
"We expect the economy to bottom out in the second half of
2011 but after that we do not see a strong recovery taking hold,
rather stagnation with growth rates around zero," said Christian
Melzer, euro zone analyst at DekaBank.
"The growth figures are miserable, the situation in the real
economy is bad -- 2011 and 2012 are going to be difficult years
for the Greek economy," he added.
HOPES PINNED ON EXPORTS
The government has said structural reforms to boost
competitiveness and progress in slashing deficits will set the
stage for stabilisation and a return to a sustainable,
export-led growth path in 2012.
While some encouraging pick-up in Greek exports has
materialised, it has more to do with recovering demand in the
global economy and less with competitiveness gains so far,
according to the country's central bank.
Returning to growth is crucial for overborrowed Greece,
especially after late 2012, when bailout funding runs dry. Its
government will need to boost revenues to service a debt ratio
projected to reach 157 percent of GDP in 2013.
"We expect fiscal austerity, a dire labour market,
rock-bottom confidence levels and less availability of credit to
keep driving renewed contractions in activity at least during
the first half of this year," said Diego Iscaro of IHS Global
Insight.
"The only hope is that exports can help to drive the economy
out of recession as activity among trade partners strengthens
during the second half of 2011. But, given Greece's weak
external competitiveness and the fact that exports only
represent less than 20 percent of the economy, this will be
difficult."
Quarter-on-quarter, Greece's economy, which makes up about
2.5 percent of the euro zone, shrank 1.4 percent in the fourth
quarter. Economists in a Reuters poll had forecast a contraction
rate of 1.2 percent.
For more information on Greek macroeconomic data, users of
Reuters 300Xtra can access the Greek National Statistics Service
homepage at:
www.statistics.gr