European Commission forecasts about the course of the Greek economy are slightly more optimistic than those included in the midterm fiscal plan that Athens has agreed on with its creditors, providing for a recession of 6 percent this year against a Greek estimate for 6.5 percent.
The fall report by the Commission forecast that Greek debt will end the year at 176.7 percent of gross domestic product and the recession will continue into 2013 before a rebound begins in the second half of next year, but with unemployment peaking at 24 percent.
However, in the report published yesterday, the European Union?s executive arm also criticizes itself for its previous failures to correctly assess the size of the Greek problems. ?The largest forecast error is for Greece, the country that has also undertaken the largest consolidation efforts,? Brussels notes.
It now expects Greek debt to soar to 188.4 percent of GDP next year and 188.9 percent in 2014, against a forecast of 191.6 percent in 2014 by Athens. The economy will contract by 4.2 percent in 2013, Brussels estimates ? against a Greek forecast for 4.5 percent ? while in 2014 it will grow by 0.6 percent. The Commission stresses that for the rebound to take place, the Greek economy will need to reverse the negative climate, which will depend on the implementation of the reforms timetable.
While according to the Commission the Greek budget will show a primary deficit of 1.5 percent of GDP this year, next year will see a primary surplus of 0.7 percent, topped by a 0.4 percent surplus in 2014.
?In 2012 however, Greece, Spain and Portugal are still registering high deficits and the adjustment process is expected to continue well beyond the end of the forecast horizon in 2014,? the Commission notes in its report. It goes on to predict that the general government deficit will reach 6.8 percent of GDP this year and drop to 4.6 percent in 2014. Unemployment is seen rising to 23.6 percent this year from 17.7 percent in 2011 and peaking in 2013 before declining to 22.2 percent in 2014.