KEPE: Greek economy returned to growth in Q2

Citigroup revises its forecast from GDP drop to increase in 2014

The Greek economy has returned to growth in the second quarter of the year after more than 20 quarters of contraction, according to the respected Center of Planning and Economic Research (KEPE), used repeatedly by the Finance Ministry for drafting policy. Even Citigroup, which is usually more reserved in its forecasts, estimates that Greece is experiencing a comeback this year.

The report published by KEPE on Thursday said that the country’s gross domestic product expanded by 0.38 percent in the April-June period, compared with the same quarter last year, leading to total growth of 0.6 percent for the whole of 2014. This will make it the first year of growth since 2008.

Official figures on the course of the GDP in the second quarter will be issued by the Hellenic Statistical Authority on August 13. KEPE further projects that the economy is expanding by 1.16 percent in the current quarter and will grow by another 1.92 percent in the October-December period, compared with a year earlier.

KEPE said that its estimate that the economy has started expanding again since Q2 “reflects the stabilization conditions that dominate Greece’s economy. The conditions derive mainly from the gradual consolidation of fiscal discipline, the implementation of a series of key structural reforms, as well as the progressive normalization of the credit sector’s operation.”

Citigroup has changed its forecast on the course of Greek economy from a 0.6 percent contraction this year to 0.3 percent growth, to be followed by 1.3 percent growth next year.

It said in a report published on Thursday that tourism and exports laid the groundwork for growth in Q2, adding that it expects the jobless rate to drop to 26.9 percent and private consumption to grow in 2014 by 1.1 percent, against a 5.8 percent drop in 2013.

Eurobank, however, argues in its weekly report that the Greek economy lagged its potential in 2013 by 12.58 percent, while the potential GDP has contracted by 10 percent compared with 2007. The same report notes that the markets are maintaining a positive stance towards the progress of Greece’s economy but deem that significant effort is still required.