Greece’s economy shrank 0.4 percent in the first quarter compared to the last three months of 2015, a flash estimate by the country’s statistics service ELSTAT showed on Friday.
Although another quarter of contraction, some economists said the reading signaled that Greece could return to growth in the second half of the year, which includes its peak summer tourism season, if talks over its key bailout review are wrapped up soon.
Economists polled by Reuters were expecting a 0.5 percent decline in gross domestic product quarter-on-quarter.
After years of recession, a contraction of 0.3 percent in 2015 was milder than expected due to tourism and as capital controls imposed on banks in June – after a clash between the left-led government and its EU/IMF lenders – damaged the economy less than expected.
The data showed the economy shrank at an annual 1.3 percent pace from January to March, a faster clip than a 0.8 percent decline in last year's final quarter, in line with market expectations.
The EU Commission expects the economy to contract by 0.3 percent this year.
Prime Minister Alexis Tsipras signed up to a new bailout worth up to 86 billion euros in July. He was re-elected in September on promises to mitigate the impact of austerity and pull the country out of the crisis.
Athens hopes to conclude in May the country's bailout review, which has dragged on for months due to differences over Greece’s economic progress, to unlock new bailout funds and start substantive talks on debt relief.
“The result is in line with our expectations and reflects a relative weakening in private consumption due to uncertainty over the conclusion of the bailout review,” said National Bank economist Nikos Magginas.
The figures confirmed expectations for a return to growth in the second half of the year, Magginas said, on condition that the conclusion of the review would offset the negative impact on economic output of the new fiscal measures Athens adopts.
The terms of the deal include pension cuts, increases in income tax, indirect taxes and value added tax.