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Greek GDP Sinks as Crisis Batters Economy

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Greece’s economy contracted 6.2 per cent in the second quarter as belt-tightening to slash deficits continued to take a toll, hampering efforts to meet targets set by the country’s international lenders for continued bailout funding.

Currently in its fifth consecutive year, the economic downturn has driven unemployment to record highs, with nearly one in four Greeks unemployed and more pain expected ahead.

“It’s not a major surprise, we knew the Greek economy was continuing to struggle but hopefully it’s some sign that the rate of decline is starting to bottom out,” said Chris Williamson, chief economist at London-based research firm Markit.

“Hopefully the first half of the year was as bad as it gets and we’ll see some improvement now,” he said.

The second quarter preliminary GDP estimate was based on seasonally unadjusted data and follows a 6.5 per cent GDP decline in the previous quarter.

Scrambling to nail down EUR11.5 billion of savings and bring the bailout programme back on track, the government plans to revive a labour reserve measure targeting 40,000 public servants for eventual dismissal.

The jobless rate has already climbed to 23.1 per cent, with nearly 55 per cent of those aged 15-24 out of work, a desperate situation that fed into the popularity of anti-bailout parties in Greek elections this year.

The scale of the contraction is making it harder for the government to meet revenue targets and reduce the budget gap. Think tank IOBE expects gross domestic product will shrink 6.9 per cent this year.

Greece’s statistics service ELSTAT did not provide detailed estimates on the GDP components – consumption, capital investment, exports and imports – in the second quarter.

(Source: Reuters)