Economic Analysis, Greece

Fiscal risks mount as economy heads for recession

Εγγραφή διαθέσιμη στα Αγγλικά Αμερικής. For the sake of viewer convenience, the content is shown below in the alternative language. You may click the link to switch the active language.

Authors: G. Hardouvelis, P. Monokroussos, C. Vorlow
Publication: Greece Macro Monitor, Eurobank Research, May 2009

Key points:

  • Domestic economic activity is expected to decelerate further this year, weighed down by tighter credit conditions and a significant deterioration in global growth dynamics. We now forecast real GDP growth to contract by 1.0% YoY in 2009, mainly as a result of lower investment spending and rapidly decelerating, though still marginally positive, consumer-spending growth
  • On a less negative note, certain country-specific cyclical and structural drivers may, to a certain extent, act as buffers to global contagion, allowing the Greek economy to maintain a significant growth differential relative to more developed euro area peers. Among other factors these may include: i. support to household disposable incomes from real wage gains and lower domestic inflation ii. less susceptibility to the international-trade channel relative to other, more industrialized countries iii. a more rigorous implementation of the New Investment Law e.g. via an acceleration of PPP projects and an increase in the absorption rates of EU structural funds and iv. a further significant deceleration in the growth of imports of goods and services this year, which should help mitigate the negative impact of lower exports growth on domestic GDP
  • National headline CPI is likely to retreat to sub-1% YoY levels in MayJuly, before edging higher thereafter, as oil price-related base influences come into effect. For the year as a whole, we forecast average inflation of just 1.1% YoY vs.4.4% YoY in 2008
  • The 3.7%-of-GDP (revised) official target for the general government budget deficit this year appears overly-optimistic and we now forecast a deficit outcome in excess of 6.0%-of-GDP. This mainly reflects our significantly-worse-than-officially-expected forecast for real GDP growth this year and concerns over the adequacy of a multitude special revenue-gen

Download Fiscal risks mount as economy heads for recession pdf

Related Posts