Greece Economy to Shrink 6.9% This Year

An Athens-based think-tank has said that the Greek economy will shrink more than forecast this year, as rising unemployment and spending cuts take its toll on demand, slowing down efforts made towards economic recovery.

According to the Foundation for Economic and Industrial Research (IOBE), the outlook for the Greece economy has worsened since April, when it had expected the economy to shrink by 5 percent and unemployment to reach 20 percent this year.

An Athens-based think-tank has said that the Greek economy will shrink more than forecast this year, as rising unemployment and spending cuts take its toll on demand, slowing down efforts made towards economic recovery.

According to the Foundation for Economic and Industrial Research (IOBE), the outlook for the Greece economy has worsened since April, when it had expected the economy to shrink by 5 percent and unemployment to reach 20 percent this year.

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In its quarterly update released yesterday, the think-thank, which was headed by Yannis Strournaras until he was named finance minister last week, said that Greece is now looking at a 6.9 percent contraction in gross domestic product this year.

In addition, unemployment in Greece is expected to reach a new high of 23.6 percent this year.

If the Foundation’s projections are confirmed, IOBE economist Angelos Tasakanikas said it would mean that Greece’s economy has shrunk by 20 percent since the end of 2007.

Bloomberg said that unemployment in Greece soared to 22.6 percent in the first quarter, while gross domestic product, which is in its fifth year of recession, shrank 6.5 percent in the same period.

The think-tank noted:

[quote] Restoring credibility will require systematic, arduous and targeted efforts. Greece must convince its partners that it will do what is needed to implement the reforms it has committed to. [/quote]

Earlier this month, a Greek government spokesman said that negative economic data could give Athens more bargaining power as it tries to persuade eurozone partners and the International Monetary Fund to ease up on the austerity measures that have been blamed for deepening the recession.

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IOBE’s gloomier outlook is bleaker than EU Commission and IMF projections, which respectively predict the 215-billion-euro economy will contract 4.7 to 4.8 percent this year.

It is also more pessimistic than forecasts of 5.3 percent by the Organisation for Economic Cooperation and Development and 5 percent by the Bank of Greece.

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