Recession in Greece deepens, its economy to shrink by 5%

The recession in our southern neighbour continues to deepen. According to official Government sources, quoted by Dow Jones, the Greek economy will shrink by 5.2% this year and will remain in recession in 2012, i.e. for a fourth consecutive year. This economic decline is much higher than the 3.8 to 3.9% of GDP drop, planned in the memorandum, signed with the EC, the European Central Bank (ECB) and the International Monetary Fund (IMF. The data about the deficit is even more alarming - in all likelihood, it will exceed 8%- 8.5% in 2011, compared to the expected 7.6%. This will form a new gap of about €3 bn in Greece’s budget.

Greek Finance Minister Evangelos Venizelos also hinted at a more pessimistic scenario for the development of the country’s economy. On Friday, he admitted that the recession would be more severe than the Government had expected and the decline could reach 4.5%. Thus, concerns as to whether the country would be able to achieve the set targets, especially regarding the deficit, increased. Although Mr. Venizelos officially refused to make specific forecasts, he hinted that the projection for a 3.8% GDP drop this year was optimistic. The official Government estimates for 2011 may be revised in October, concurrently with the drafting of the national budget for next year. The new speculations are practically bringing Greece back to the spotlight of markets which have turned their look to the situation in Spain, Italy and even France.

However, according to preliminary data of the Greek National Statistical Service, released at the beginning of August, in Q2 2011 the country’s GDP shrank to -6.9%, compared to the same period of last year. For comparison, the decline in Q1 2011 was 5.5% year-on-year.

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