Greece's recession 'deeper than feared'

13 August 2010

The recession in Greece is worse than had been previously thought.

In the figures for the second quarter of the year, it was revealed that gross domestic product (GDP) fell by 1.5 per cent during the period and was 3.5 per cent lower than in the same quarter last year.

A recent poll of analysts by Reuters had forecast that the quarterly drop would be around one per cent and the annual fall about 3.3 per cent.

Greece is expected to remain in recession for the rest of 2010 as the fiscal squeeze on the country continues, reports the Guardian.

Public spending has been slashed as politicians fight to regain the confidence of the financial markets and reduce the budget deficit following a multibillion euro bailout of the nation.

The cuts have led to widespread social unrest and industrial action as citizens protest against the austerity measures.

In May, it was revealed that unemployment in the country has risen to 12 per cent, up from 8.5 per cent one year earlier.

It was the biggest jump since comparable records began in 2004.

Unemployment among people aged between 15 and 24 years old is now at 32.5 per cent.

Greece's problems may yet get worse as its budgetary overhaul continues to take effect, it has been warned.

Giada Giani from Citigroup said: "We think the largest hit to private consumption from tighter fiscal policy is probably still ahead of us, as monthly indicators on consumer spending had not really plummeted yet in the second quarter.

"On the other hand, net export probably provided a large positive contribution to GDP as export growth is lifted by improving global trade while import is depressed by falling domestic demand."

An average decline of around 3.5 per cent was forecast for the rest of the year by the analyst.

Last month, officials from the International Monetary Fund and the European Central Bank visited Greece to conduct an assessment on how it is implementing its economic reforms.

By Claire Archer

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