Greece says economy stronger than thought in Q1, shrinking by 0.9%

Friday 06 June 2014 12.09
Greek economy contracted by 0.9% in Q1 instead of the predicted 1.1%
Greek economy contracted by 0.9% in Q1 instead of the predicted 1.1%

The Greek economy did markedly better than expected in the first quarter of this year, shrinking by 0.9% over a year instead of the 1.1% estimated in May, the statistics office said today. 

The bailed-out and austerity-shocked economy has been in recession for six years, but the latest figures support the government's hopes that this year the economy will switch into growth of 0.6%.

That would mark rapid progress, since in the last quarter of last year, the economy showed shrinkage over 12 months of 2.3%. In the whole of 2013, gross domestic product shrank by 3.9%.

The statistics agency Elstat said that the first-quarter performance had turned out stronger than thought because data which had not been available previously had been included in the update. 

Greek exports rose by 5.4% on a 12-month basis. This is important because a trade deficit tends to weigh on growth, but a surplus contributes to expansion, and the euro zone countries which ran into deep trouble are all looking in large part to export-led growth to pull them up.

In Greece, the export performance was lifted by a 13.1% rise by the services sector, driven by expected record tourist visits this year, for the second year running. 

Households have been hit dramatically by the recession, by tax rises and by pension and pay cuts to correct national finances, but even consumer spending turned in a positive figure, rising by 0.8% in the quarter. That was the first such increase for at least two years.

The recession has been easing noticeably since the third quarter of last year.

Extremely high unemployment has began to fall slowly in September last year, and was down to 26.8% of the workforce in March, although this is one of the highest levels in the euro zone along with the rate in Spain. 

The European Commission estimates that euro zone Greece will emerge from recession this year and will advance to growth of 2.9% in 2015, driven by progress on budget stability, competitiveness and confidence which will boost exports and investment.

Next year, investment would take over as the main force in the economy, it said in its recent forecasts.

But the Organisation for Economic Cooperation and Development, a policy forum for 34 advanced democracies,  said in May that Greece will end up with a recession of 0.3% this year, but will switch into growth in 2015. 

The country was plunged into a deep debt crisis in 2010, two years after the financial crisis broke and after Greece revealed that it had falsified growth data. 

This propelled Greece into the first rescue in the euro zone which itself was then dragged into a wider debt crisis. The country was rescued by the International Monetary Fund and the European Union with help totalling €240 billion.

Cyprus Q1 GDP dipped 0.7%

Cypriot GDP contracted by 0.7% in the first quarter of 2014, a slight improvement on the 0.8% drop in the previous three months, the latest official estimate showed today.

The figure is the same as given in a flash estimate by the state statistical service on May 15. 

It showed that real GDP shrank by 4.1% in the first quarter from a year earlier, compared with a year-on-year drop of 4.9% in the previous three months. 

Cash-strapped Cyprus received a €10 billion bailout from the European Commission, European Central Bank and International Monetary Fund last year in exchange for adopting a harsh austerity plan and reorganising the banking sector. 

The struggling economy has performed better than expected, and the government has won praise for sticking to the austerity programme.