Greek economy to grow by 0.7% after six years of recession
Economic think tank predicts small expansion but says unemployment will remain high
An Athens’ metro construction worker places reinforcement bars at the Agia Varvara worksite in eastern Athens. Photograph: Alkis Konstantinidis/Reuters
Greece’s economy should grow 0.7 per cent this year, pulling clear of a six-year recession, but its soaring unemployment rate is likely to drop less than hoped, the country’s leading economic think tank said today.
The IOBE research institute had earlier predicted a small expansion for the year, without setting a forecast. Its GDP growth projection is broadly in line with the European Union and International Monetary Fund estimate of 0.6 percent.
The recession has driven unemployment to record highs and the highest in Europe, leaving nearly three times as many Greeks jobless as in 2008 when the downturn began. IOBE, which had previously expected joblessness to drop to 26 per cent this year, said it now saw the rate easing to an average of 26.7 per cent, citing a wave of public sector layoffs demanded by the country’s creditors. Unemployment was 27.8 per cent in the first quarter.
Household consumption is expected to grow by 1 percent this year as hiring picks up during Greece’s summer tourism season, IOBE said. Greece expects to beat its target of 13 billion euros in revenues from tourism in 2014. The EU and the IMF, which have bailed Greece out twice with 240 billion euros in rescue aid, see private consumption dropping by 1.8 percent this year.
IOBE also said it expected the results of European Central Bank stress tests later this year to show that the capital needs of the country’s top four lenders were small or close to zero. Greece’s four biggest banks - Eurobank, Alpha Bank, Piraeus Bank and National Bank - control about 90 per cent of the sector. They have already been through two rounds of recapitalisation after two stress tests by the country’s central bank.