Greece will enter its seventh year of recession in 2014 before the country’s economy begins to rebound in 2015, according to estimates in a report issued on Tuesday by the Organization for Economic Cooperation and Development (OECD) which also urges support for the social groups that have been hit hardest by the crisis.
While the European Union projects a return to growth for Greece in 2014, the OECD expects the country’s economy to shrink in 2014 by 1.3 percent, “due mostly to fiscal retrenchment,” revising its earlier estimate for growth of 0.2 percent. It expects a 4.5 percent contraction in GDP next year.
“If growth proves lower than assumed in the government’s fiscal plans, then the automatic stabilizers should be allowed to operate, even if this means missing the set targets,” the report states. “The most vulnerable strata will have to be protected from any further social cuts,” it adds.
The OECD sees public debt rising to 189 percent of GDP next year and to 195 percent in 2014 unless additional debt reduction measures are taken, from 177 percent this year. The report was drafted before the Eurogroup decision on Monday that eased Greece’s loan terms.
The budget deficit is expected to end up at 6.9 percent this year and drop to 4.6 percent in two years’ time. The current account deficit is seen dropping to 2.3 percent in 2014 from 5.5 percent this year, while exports are expected to grow by 6.1 percent by 2014 and imports to shrink by 3.2 percent.
The report adds that unemployment will continue to break one record after another and acknowledges that the economy suffered additional pressures this year owing to the tough but absolutely necessary fiscal adjustment process that has led to a reduction of salaries, trust and external demand.
The rebound is connected with the strengthening of international commerce, the restoration of confidence in Greece and the recovery of the country’s competitiveness. The OECD also sees a key role in the implementation of the structural measures that include the aggressive combating of tax evasion, an improvement in the efficiency of public administration, a lifting of market barriers and the opening up of competition.