ECONOMY

Unexpected economic growth in Q1

Greece?s economy expanded in the first quarter of the year providing an unexpected bright spot in the country?s grey economic landscape in a development that will help boost state revenues, according to the government.

However, the European Commision predicted on Friday that Greece?s recession this year will be deeper than it had initially predicted and will send the budget deficit above Greece?s official targets.

On a quarter-on-quarter basis, Greece?s 235-billion-euro economy expanded by 0.8 percent in the first three months of the year, after contracting by 2.8 percent in the last quarter of 2010.

It was the first quarterly growth rate seen since the third quarter of 2009.

On an annual basis, ELSTAT said the economy contracted at a 4.8 percent rate on the year, versus economists? expecations for a decline of between 5.8 percent to seven percent.

The better-than-expected figures were largely the result of strong growth in exports and a relative stabilization in consumer spending, according to economists.

The Finance Ministry said that the recession was showing signs of easing, which should help boost tax collections in the future.

“The recession is becoming significantly shallower,» the ministry said in a statement. «The easing in the recession and the positive rate of growth in the first quarter of the year is also a sign that public revenue will also improve from here on.”

The European Commission?s take on Greece was less upbeat as Brussels said in its spring outlook published on Friday that the local economy will shrink 3.5 percent his year, compared with a forecast contraction of 3.0 percent just two months earlier.

The report also said that Greece’s budget deficit, excluding planned new austerity measures, would hit 9.5 percent of GDP in 2011, more than two percentage points above the 7.4 percent goal set out in this year’s budget.