ECONOMY

Economy shrinks by 4.5 percent

Greece’s economy shrank at an annual 4.5 percent pace in the third quarter as the recession deepened from a 4.0 percent slump in the previous quarter, according to provisional estimates unveiled by the Hellenic Statistical Authority (ELSTAT) yesterday. Quarter-on-quarter, Greece’s 240-billion-euro economy, which comprises about 2.5 percent of the eurozone economy, shrank 1.1 percent. Economists had forecast a contraction rate of 1.4 to 1.5 percent. «Recessionary pressures are intensifying on a yearly basis, as domestic demand weakens and this cannot be offset by the relative improvement in exports,» National Bank economist Nikos Magginas told Reuters. «The average decline in economic activity in the first three quarters of 2010, following today’s revision [of past data], comes to minus 3.7 percent. This confirms the EU-IMF and government forecast of a 4.0 percent recession or a touch deeper,» he added. The contraction in Greece contrasted with growth in Germany, France and Italy that helped fuel an expansion of 0.4 percent in the euro region in the quarter. Finance Minister Giorgos Papaconstantinou said in September that the brunt of the austerity measures in Greece would be felt in the third quarter. European Union statistical service Eurostat is set to announce revisions of Greece’s 2009 deficit and debt on Monday, with Papaconstantinou saying the budget gap could come in at 15.5 percent. This may have a knock-on effect on the deficit for this year and next, possibly entailing further spending cuts as revenue collection falls short of targets. Austerity moves, coupled with higher inflation and mounting unemployment, are dampening household and business spending power. Greece’s economy will shrink 4 percent this year, according to government and EU estimates. That’s twice the pace of last year’s contraction. «The significant decrease recorded in final consumption expenditure and gross fixed-capital formation has contributed to the decline of gross domestic product,» ELSTAT said in a statement. «The improvement in the external trade balance has partially offset the effect of the above factors.» Final third-quarter gross domestic product figures are due on December 9.