Nearly zero growth for Greece

The European Commission has slashed its forecast for Greece’s projected 2009 economic growth rate to just above zero and predicted that the country’s budget deficit will exceed the 3 percent mark amid the worst global crisis in decades. In an interim report released yesterday, the Commission said Greece’s 240-billion-euro economy is seen as expanding in 2009 by 0.2 percent, versus a previous estimate of 2.5 percent growth. The economy is estimated to have expanded by almost 3 percent last year. «Within a context of uncertainty on global markets, tightening credit conditions should put a brake on private consumption while investments should contract further,» said the the EU’s executive branch in the report. The outlook for the eurozone’s 16-member group is grim, expecting it to shrink by 1.9 percent this year before growing by only 0.40 percent in 2010. The economies of Ireland, Spain and Germany are expected to shrink this year by 5.0, 2.0 and 2.3 percent respectively. Greece is likely to avoid falling into a recession – where economic growth contracts for two consecutive quarters – however, two of the country’s largest sectors, tourism and shipping, will be severely tested by the downturn. «Transportation and tourism services are also increasingly vulnerable to the adverse international outlook and are foreseen to contract, implying a neutral contribution to GDP growth from net exports,» the report said. In response to the news, Greek stocks tumbled yesterday, losing more than 5 percent, as the EU forecasts increased investor concerns about corporate earnings this year, particularly among banks. On the fiscal front, Greece’s ballooning budget deficit is tipped to reach 3.7 percent of GDP in 2009, from 3.4 percent last year, before widening to more than 4 percent in 2010. The fiscal blowout would mean that Greece would breach the EU’s 3 percent limit for four straight years, according to the Commission. This could result in the EU launching against Greece the excessive deficit procedures – disciplinary action by the Commission against countries that surpass the limit and can also lead to penalties. [email protected] Beating grim Brussels forecasts National Economy and Finance Minister Yiannis Papathanassiou said yesterday that he was optimistic Greece could outperform the results forecast in the European Commission’s interim report while also improving its fiscal record. After meeting with EU Economic and Monetary Affairs Commissioner Joaquin Almunia in Brussels yesterday, Papathanassiou said the government’s economic priorities would focus on fiscal adjustment and supporting the social groups hardest hit by the downturn. «We believe that with the policies we will follow we will have positive results and will achieve better performance than the Commission has forecast for Greece,» he said. Next week, the Finance Ministry is expected to submit to Brussels its updated Stability and Growth Program, in which it will lower its gross domestic product growth target for 2009 from 2.7 percent currently.

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