Fragile recovery within sight, says German lender

It was by a hair-thin margin that the Greek economy missed recording positive growth for the first time since 2008 in the second quarter of 2014, the German bank Berenberg said in an analysis on Wednesday.

Nevertheless, it noted that the slight contraction of 0.2 percent in gross domestic product (GDP), announced on Wednesday, was the smallest in the six-year period and strengthens hopes that Greece could achieve the first actual rise in GDP this year since the crisis began. Even more important, according to Berenberg, is the fact that if the data were seasonally adjusted (which the Hellenic Statistical Authority does not do), then Greek GDP would have risen by up to 0.5 percent in comparison to the first quarter of 2014.

This signals the end of recession and the first recovery in GDP after a brief spell late in 2009. Nevertheless, the ongoing revision of official statistics is expected to be finalized in September and may lead to significant changes in post-2012 data. In other words, caution is advised in reading the data announced on Wednesday.

Despite the positive signs that Greece is indeed exiting the recession, such as in the Economic Climate Index and the Purchasing Managers Index, its effects will continue to be felt for a considerable time yet, the analysts believe.

Unemployment rocketed from 7.6 percent in 2008 to 27.9 percent in September 2013 and has only just started receding, down to 27.2 percent in May. The insecurity felt by working people has had a negative effect on consumption and, despite the adoption of a wide range of structural measures, the steep rise in taxation continues to dampen investment.

It is likely that, for one more year, Greece will have to rely on a very good tourism season in order to return to growth, Berenberg says. An improvement in the growth rate is unlikely to limit the most serious threat to a Greek recovery – that is, political instability. Only a rise in employment and a robust recovery are seen offering the present fragile government a good chance of winning the next election.