Economy shrinks to 2005 level in second quarter

The second quarter of 2012 was the Greek economy?s worst in the last eight years, and the outlook remains bleak despite the fact that the recession eased compared to the first quarter.

The Hellenic Statistical Authority (ELSTAT) announced Monday that gross domestic product shrank 6.2 percent in the second quarter from the same period last year to 43.6 billion euros, after contracting 6.5 percent in the first.

The figure is the lowest for a second quarter since 2005, while the drop brought the cumulative contraction to 9.2 billion euros — or 17.4 percent — since the second quarter of 2008, the first year of recession.

The European Commission in May forecast that Greece?s economy will shrink 4.7 percent this year but ministers are reportedly much more downbeat now.

According to sources, they see no tangible signs that the economy will be extricated from the spiral of recession any time soon and project the contraction at around 6.8 percent for the year as a whole.

The economy has contracted in 14 of the past 15 quarters.

The two general elections in May and June caused serious delays in the reform program, while austerity measures have extracted considerable resources from the real economy and deepened the recession.

The drops in consumption and investment are considered the two factors most responsible for the continued shrinking of GDP, which is nevertheless lower than the 7.3 percent contraction seen in the second quarter of 2011.

Public investment in the January-July period came to 2.3 billion euros, against a target of 4.2 billion.

Separately, the Bank of Greece said Monday that the central government cash deficit fell to 7.2 billion euros in the first seven months of 2012, compared with 15 billion in the same period a year earlier.

Government revenue declined to 26 billion euros from 27.3 billion euros in the seven months through July 31 a year earlier, while expenditure decreased to 32.6 billion euros from 40.9 billion euros last year.