Economy contracted in 2016 after all


Optimists who had estimated the Greek economy would return to growth from last year were brought back down to earth on Monday as the revised figures of the Hellenic Statistical Authority (ELSTAT) showed that the country’s gross domestic product shrank 1.1 percent on an annual basis in the October-December period, leading to a marginal contraction of 0.05 percent for the whole of 2016, against a previous estimate of 0.3 percent growth.

A series of figures were revised downward to reflect a more precise picture of the stagnant reality. The analyses of the various domains illustrate that the hopes of a rebound had been based on consumption and not on investments, with analysts expressing worries about 2017 as its prospects are burdened further by the uncertainty over the bailout review.

On a quarterly basis GDP contracted a considerable 1.2 percent, compared to the previous estimate of a 0.4 percent contraction.

The latest data have refuted recent estimates by the European Commission and the International Monetary Fund regarding the course of the economy in 2016, as the former had foreseen 0.3 percent growth and the latter an expansion of 0.4 percent. However, it must be noted that the 2017 budget has been based on GDP shrinking 0.3 percent during 2016.

The figures came out at a sensitive time for the bailout review, and Finance Minister Euclid Tsakalotos sought to downplay their impact on Monday, saying that the course of a single quarter is coincidental and cannot affect the country’s negotiating line. Government sources added that no conclusions should be reached before the final figures come out next month.

Analysts warn that the omens are negative for this year too, given the drop in consumer confidence in the first two months of 2017 and the delay in the review. Michalis Masourakis, chief economist at the Hellenic Federation of Enterprises (SEV), warns that all investment decisions will remain pending as long as the delay in reaching a deal persists.

Similarly Tassos Anastasatos, Eurobank’s deputy chief economist, notes that the 2016 GDP revision creates a negative springboard for 2017 and, along with the first signs for this year, generates reservations and highlights the need for the review to be completed to lift the uncertainty.