Gov’t: Economy on target after 5.3 pct contraction in Q1

The first quarter of this year saw the Greek economy contract to 2000 levels, having lost all that it had earned in the 2000-08 period after six consecutive years of recession. However, the Finance Ministry believes that the situation will have stabilized a year from now, at which point a gradual rebound is expected to begin.

According to provisional estimates issued on Wednesday by the Hellenic Statistical Authority (ELSTAT), the country’s gross domestic product amounted to 37.8 billion euros in the first three months of 2013 (using 2005 prices as a yardstick), with the contraction amounting to 5.3 percent on a yearly basis.

Since 2000 the Greek economy’s best quarter was Q3 of 2007, with GDP at 55.3 billion euros, while the best Q1 was in 2008 with 49.5 billion euros.

The ministry believes that the situation is starting to plateau, as the contraction rate slowed down in Q1, having amounted to 5.7 percent in the last quarter of 2012 and 6.7 percent in Q1 of last year.

Ministry sources suggest that this trend toward a recession slowdown will continue in the following quarters of the year, with the best result expected in Q3, at the peak of the tourism season: Tourism arrivals are estimated at 17 million this year, representing an increase of 1.5 million tourists and an additional 1 billion euros in national revenues from last year.

Greece’s constantly improving economic climate following the completion of the inspection by the representatives of the country’s creditors is also assisting the country’s economy, both on a sentimental level and in real terms, on the condition that discussions for investments in Greece held in recent months turn into reality.

Still, the ministry is not changing its target set for the GDP contraction this year. The government had forecast a 4.5 percent GDP decline in the medium-term fiscal plan, with the Q1 performance showing that the target is not impossible given the expected increase in tourism arrivals and investments.

For most economists the key period will be this coming fall, when the debate about the sustainability of the Greek debt and a possible haircut on the official sector debt will resume.