Greek economy contracts at slowest rate since 2008
Greece's Deputy Finance Minister Christos Staikouras talks to reporters while presenting budget execution figures at the finance ministry in central Athens, on Wednesday, Aug. 13, 2014. Greece’s economy is shrinking at its slowest rate in nearly six years, boosting hopes that the end of the punishing recession is in sight. (AP Photo/Petros Giannakouris)
ATHENS, Greece - Greece's economy is shrinking at its slowest rate in nearly six years, official figures showed Wednesday, reinforcing hopes that the end of the country's punishing recession is in sight.
The Statistical Authority said Greece's economy was only 0.2 per cent smaller in the second quarter than it had been a year earlier — the lowest since the third quarter of 2008. In the first quarter, the Greek economy was 1.1 per cent smaller, slightly worse than previously thought. The statistics office does not publish quarterly figures.
After six years of recession brought on by the global financial crisis and Greece's homegrown debt problems, many economists are predicting modest growth in the second half of 2014.
Since the recession started in 2008, Greece's economy has shrunk by around a quarter, partly because the government had to impose tough deficit-slashing measures, such as spending cuts and tax hikes, to get its public finances into shape in return for international bailout loans from its European euro partners and the International Monetary Fund. Its recession — some refer to it as a depression — is one of the worst to afflict the Western world since the end of World War II.
Capital Economics analyst James Howat said the Greek economy appears to be "slowly emerging from the abyss." But he warned that recovery remains anemic, particularly within industry and among consumers, despite an expected tourism boon.
"Growth remains too weak for the country to reduce its huge public debt without significantly more outside help," he said.
After years of austerity and bailout, Greece's budgetary position is certainly a lot better than it was when the debt crisis really erupted in late 2009 and threatened the country's future in what is now the 18-country eurozone. The country, which had to seek its first bailout in May, 2010 after being locked out of international bond markets, is even managing to tap investors again.
On Wednesday, Europe's bailout fund approved the release of another 1 billion euros in rescue loans to Greece, bringing the total disbursed so far to just under 142 billion euros. Another 1.8 billion euros remain available for Athens from the fund.
Despite its hefty fiscal adjustment over the past few years, Greece has the highest debt burden in the eurozone at around 174 per cent of GDP. That's considered unsustainable in the long-run and the country is expected to get more debt relief from its creditors.
One important requirement for any further relief is Greece posting a so-called primary surplus — government receipts have to be higher than spending after debt and interest payments are stripped out.
Separate figures Wednesday from the Finance Ministry showed that Greece is doing just that. Leaving aside the cost of servicing Greece's 320-billion euro ($425 billion) or so debt, the country had a surplus of 2.3 billion euro surplus, or 1.25 per cent of its annual gross domestic product, in the January to July period.
Overall, the finance ministry said the budget deficit fell to 0.95 per cent of the country's annual GDP, better than the 1.8 per cent target.
"We're certainly not out of the crisis," Deputy Finance Minister Christos Staikouras said. "But we're on the way out. Just as the crisis started with numbers and spread to society, the improvement will start with fiscal data and will then be felt in the real economy and society."