According to the quarterly Eurozone Forecast report by Ernst & Young, which is based on the forecasts of Oxford Economics, Greek gross domestic product will suffer a decline of 2.9 percent this year, while relations between the government and its creditors could experience fresh tension that may put Greece’s eurozone membership at risk yet again.
These particularly negative estimates are very different to those made by the government, or even the European Commission. They are based on the assumption that the implementation of the agreed measures will be harder than voting them through Parliament and that the reviews of the bailout program will lead to Greece significantly lagging its targets.
The second half of 2016 is of greater concern, according to Oxford Economics, as EY explains that “the first notable loan obligation payments are scheduled for July, so Greece will not occupy the international press in the first half of the year.”
The estimate for 2015 is for GDP growth of 0.3 percent, although the precise impact of the uncertainty seen in the first half of 2015 and the capital controls on the real economy is not yet known.
GDP grew 0.9 percent in the second quarter of 2015 as households rushed to spend their savings or stash them elsewhere ahead of a possible eurozone exit, but this also led to a reduction in consumption in the second half of last year. The capital controls introduced in late June will likely have had a negative impact on economic activity, leading to a sudden drop in GDP from July to December. The fiscal adjustment required by the bailout program will lead Greece to further recession, which will become evident in the 2016 figures.
Commenting on the findings of the report and the Oxford Economics data, the chief executive of EY Greece, Panayiotis Papazoglou, said: “After a really turbulent year, the completion of the deal with the creditors and the approval of the first prior actions by Parliament create the prospects for the country’s return to growth in the medium term. However, the next steps toward the implementation of the agreed measures continue to constitute a major challenge for the country.”