ECONOMY

OECD sees economy contracting

Greece’s economy is likely to slip into recession this year, pushing up the country’s unemployment rate to above 10 percent in 2010, according to the Organization for Economic Cooperation and Development (OECD). «Activity is expected to contract in 2009 on the back of weakening exports and to recover only slowly in 2010,» the OECD said in a statement. The Paris-based organization said Greece’s gross domestic product is likely to shrink by an annual pace of 1.3 percent this year before recovering slightly in 2010 to a growth rate of 0.3 percent. Exports of good and services – which are dominated by tourism and shipping receipts – are likely to dip 23.4 percent year-on-year, it added. The OECD’s 2009 forecast points to Greece entering its first recession in more than 15 years, as the eurozone contracts by 4.8 percent due to «collapsing external demand and domestic demand, weakened by tight financial conditions, rising unemployment and heightened uncertainty.» On a brighter note, the OECD raised its forecast for the economy of its 30 member nations for the first time in two years as the US slump shows signs of easing. The combined economy of the world’s most industrialized countries will shrink 4.1 percent this year, versus the OECD’s March forecast of 4.3 percent. Unemployment among Greece’s 4.5 million work force will rise to 10.3 percent next year, from 9.5 percent in 2009, the group predicted. Figures from the National Statistical Service showed Greece’s jobless rate hit 9.3 percent in the first quarter of the year, a three-year high. Public finances are seen as getting worse due to the deteriorating economic conditions. The OECD said it sees Greece’s budget deficit widening to 6.7 percent of GDP next year from 6.1 percent in 2009. «Sustained consolidation hinges upon strict control of spending, the broadening of tax bases and curbing tax evasion,» it said. «Additional reforms in the pension and healthcare systems are also essential,» it added.