Greek economy shrinks in first quarter, hurt by bailout review uncertainty
Greece’s economy contracted in the first three months of the year but less than in the final quarter of 2016, flash estimates by its statistics service showed on Monday, as jitters over the conclusion of a bailout review hurt business confidence.
The data showed the economy shrank 0.1 percent in January-to-March compared to last year’s final quarter when gross domestic product contracted by 1.2 percent.
The seasonally adjusted data also showed that the Greek economy contracted at an annual 0.5 percent pace in the first quarter, at a slower clip than in the fourth quarter of 2016, when it shrank by 1.1 percent.
“The weakness seen in the fourth quarter continued but at a softer pace in the first three months,” said National Bank economist Nikos Magginas. “It’s an encouraging sign given that up until February uncertainty over the successful conclusion of a bailout review remained high.”
Greece and its foreign creditors reached a deal on reforms in early May after six months of tense negotiations that hurt economic activity.
The leftist-led government hopes that legislating new austerity measures by May 18 will allow its eurozone partners to approve the deal when they meet on May 22 and to release a new tranche of bailout funds.
The government downwardly revised this year’s growth projection to 1.8 percent from 2.7 percent previously when it unveiled its medium-term fiscal strategy on Sunday.
It expects the recovery to strengthen next year with GDP growing by 2.4 percent. Last week the EU Commission also cut its economic growth forecast for Greece to 2.1 from 2.7 percent.
Economists said the downward revisions rendered the forecasts more realistic.
“The Q1 flash estimates were broadly in line with expectations,” said Eurobank's chief economist Platon Monokroussos. “GDP growth dynamics are likely to strengthen in the months ahead on expectations for a bailout review deal and a strong tourism season. But full-year forecasts are biased to the downside due to the soft Q1 start and last year’s carry-over.”
The statistics service is likely to revise the flash estimates when it releases provisional first quarter data on June 2.