ECONOMY

‘Greek economy to shrink in 2009’

The European Commission expects Greece’s economy to tip into recession this year, for the first time in more than 15 years, due to the ongoing crisis and prevailing uncertainty. In its spring forecast released yesterday, the European Commission said it expects the 250-billion-euro Greek economy to shrink at an annual pace of 0.9 percent this year, revising lower its previously anticipated expansion rate of 0.2 percent, before recovering to a positive growth rate of 0.1 percent in 2010. Decelerating private consumption, lower investment and a significant drop in exports are among the key factors seen weighing on the economy. «Although remaining above the eurozone average, economic growth will turn negative in 2009 for the first time since 1993,» the Commission said in a statement. Brussels expects total gross domestic product (GDP) of the 16-member eurozone to shrink by 4 percent this year ahead of an anticipated negative growth rate of 0.1 percent next year. The growth outlook for Greece is the second best in the eurozone after Cyprus – the only economy in the single currency club projected to grow this year, according to the Commission. Shrinking international trade volumes and the deteriorating competitiveness of the Greek economy are likely to result in a decline in exports of goods while receipts from services such as tourism and shipping are expected to follow a similiar path. Tourism and shipping are key components of the Greek economy, accounting for about 17 percent and 7 percent of annual output respectively. The Commission also highlighted «persisting fiscal imbalances» in government finances, forecasting a budget deficit of 5.1 percent this year versus 5 percent in 2008. Greece’s public debt, the second highest in the eurozone after Italy, is also projected to continue its uptrend, reaching 108 percent of GDP in 2010. [email protected] Forecast missing gov’t measures Economy and Finance Minister Yiannis Papathanassiou said the European Commission’s forecast for Greece does not take into account recent government steps aimed at boosting the economy. The Commission’s spring forecast sees the Greek economy shrinking by an annual pace of 0.9 percent in 2009, before recovery to a growth rate of 0.1 percent next year. The Finance Ministry is more optimistic and is sticking to its anticipated expansion rate of 1.1 percent for this year. «The Commission does not take into account recent measures taken by the government to support growth, such as moves to boost construction activity, the car market and labor market,» the minister said in a statement yesterday. Last week, the ministry said it will subsidize loans and increase tax benefits for property buyers in a bid to boost the construction sector after having announced recent cuts in registration tax for new cars. The conservative government has also announced a 2.5-billion-euro program aimed at stemming rising jobless numbers. «Under any circumstances, the government will assess in June the course of the economy and, if needed, will move ahead with the necessary adjustments,» added the minister.