The contraction of Greece’s gross domestic product in the third quarter of the year was larger than originally anticipated, putting in doubt the Finance Ministry’s new forecast for this year which is included in the final draft of the 2016 budget.
According to provisional data released by the Hellenic Statistical Authority (ELSTAT) on Friday, economic activity in the July-September quarter decreased by 1.1 percent from the same period last year, while just days earlier, on November 13, the statistical agency had issued an estimate for a contraction of just 0.4 percent.
This difference stems from the fact that, unlike the data for the majority of September indices, the figures for the service sector had not been compiled two weeks ago. This significant margin is attributed to the big fall in investments and exports, while the capital controls and the three-week bank holiday also brought about a major decline in imports.
The new GDP data bring into dispute the ministry’s latest forecast for zero recession at the end of the year, included in the final draft of next year’s budget which was tabled in Parliament last week. As things stand now, the first nine months of the year saw a marginal expansion of GDP by 0.06 percent year-on-year, which means that for it to come to zero by the end of the year the expected contraction in the current quarter will have to be minimal – which not only economists but also ministry officials consider highly unlikely.
Therefore it is virtually certain that the economy will return to recession in 2015 after a year’s respite in 2014, even if that is smaller than the 2.3 percent originally feared. Estimates now put it at around 0.5 percent of GDP.
The Q3 contraction is attributed to the 27 percent reduction in investments, the 11.4 percent drop in exports, the 19.9 percent slide in imports and the anaemic growth in consumption, which amounted to just 0.1 percent. All of these negative causes are the result of the capital controls introduced on June 28.