IMF sees Greek economy shrinking 4.7 percent this year

The International Monetary Fund has forecast that the Greek economy will shrink by 4.7 percent of gross domestic product this year and that the country will not see any growth in 2013.

The IMF published its World Economic Outlook on Tuesday. It warned of an ?uneasy calm? in the global economy and predicted that the eurozone would not return to growth until next year.

As for Greece, the IMF predicted that the Greek economy, in recession since 2008, will contract close to what the Washington-based fund, the European Commission and the European Central Bank ? known collectively as the troika ? predicted in the scenario used to agree Greece?s second bailout.

In the debt sustainability analysis (DSA) produced by the troika, the baseline scenario forecast a 4.8 percent contraction in the Greek economy this year. The alternative scenario predicted that the economy would shrink by 5.2 percent of GDP.

The IMF forecasts that unemployment in Greece will reach 19.4 percent this year.

“The world economy is in uneasy calm … there is a feeling that things could get very bad again. That pretty much shapes our forecast,» IMF chief economist Olivier Blanchard told reporters.

“Our baseline forecast is for low growth in advanced countries, especially in Europe, but with downside risks being extremely present.”

Blanchard said the IMF would not like to see further fiscal consolidation should growth prospects in Spain and other countries worsen.

The European Central Bank should cut interest rates and keep its crisis measures in place to help euro-region growth and support the banking system, according to the IMF.

?Given the broad need for fiscal adjustment, much of the burden of supporting growth falls on monetary policy,? the Washington-based lender said today in its World Economic Outlook.

?The ECB should lower its policy rate while continuing to use unconventional policies to address banks? funding and liquidity problems.?

The ECB cut its benchmark rate to a record low of 1 percent in December and pumped 1 trillion euros into the banking system to secure the supply of credit to households and companies.

The euro-area economy is projected to shrink by 0.3 percent in 2012, an improvement from the 0.5 percent contraction the IMF forecast in January.

The region will return to 0.9 percent growth in 2013, up from the fund?s previous forecast of 0.8 percent.

[Kathimerini English Edition