World Bulletin / News Desk
Greece's economy shrank 6.2 percent on an annual basis in the second quarter, a slump thatis expected to persist as the government scrambles to nail downbillions in additional cuts to keep international bailout fundsflowing.
Currently in its fifth consecutive year of economicdepression, Greece is suffering record unemployment with nearlyone in four Greeks without a job, undermining efforts to meetrevenue targets and reduce the budge Athens is keen to convince euro zone partners and the International Monetary Fund of its will to bring an economic adjustment plan back on track before asking for modifications and more time to spread out the pain of more cutbacks. But the fiscal drag caused by the pursued austerity policiescoupled with liquidity constraints and lingering uncertainty islikely to keep recessionary headwinds in full force.
"We project GDP to contract by 7.1 percent in 2012 and by2.4 percent in 2013, on the back of further significant declinesin disposable incomes, rising unemployment and plummetinginvestment activity," Eurobank economist Theodore Stamatiou said.
Greece's jobless rate has already climbed to 23.1 percent,with nearly 55 percent of those aged 15-24 out of work, adesperate situation that fed into the popularity of anti-bailoutparties in elections earlier this year.
The three-party coalition government that emerged after tworounds of polls is working to nail down 11.5 billion euros ofsavings and plans to revive a labour measure targeting 40,000public servants for eventual dismissal. Without the additional savings the government's budget willstill show a primary deficit of 1 percent of GDP in 2014, wellshort of a targeted 4.5 percent surplus to help stabilise debt.
The second quarter preliminary gross domestic product(GDP)estimate, released by statistics service ELSTAT on Monday,was based on seasonally unadjusted data and follows a 6.5percent GDP decline in the previous quarter. Think tank IOBE expects the economy to shrink 6.9 percentthis year, a bleaker outlook than estimates by the Bank of Greece and the OECD earlier this year, which project acontraction of 5.0 to 5.3 percent, respectively.
ELSTAT did not provide detailed estimates on the GDP components - consumption, capital investment, exports andimports - in the second quarter. "It's not a major surprise, we knew the Greek economy wascontinuing to struggle but hopefully it's some sign that therate of decline is starting to bottom out," said Chris Williamson, chief economist at London research firm Markit. Greece is behind targets and structural reform benchmarksagreed with international lenders who are demanding fullimplementation before official funding resumes.
Inspectors from the European Union, International MonetaryFund and European Central Bank troika have back an assessment ofGreece's performance and will report back in September onwhether it deserves to get more payments under the 130 billioneuro rescue package. Weak spots where Greece has failed to deliver as plannedinclude public sector job cuts, reductions in state-run pensionbenefits, the settlement of nearly 7 billion in state arrearsand proceeds from privatisations.
The government changed the leadership team at theprivatisation agency aiming speed up the asset sales programmewhich fell far below a target of more than 3.6 billion euros. Public administration reform, renewed emphasis on curtailingtax evasion are also part of the reforms agenda.