The European Commission has estimated that Greece has shown resilience in face of the capital controls that were introduced in 2015, as explained in the published European Economic Forecast for Winter 2016.
The EU΄s executive announced that in the first three quarters of 2015, Greece’s economy proved resilient despite the introduction of the emergency bank holiday, capital controls, and heightened uncertainty related to prolonged programme negotiations. Private consumption was stronger-than-expected, with households preferring to spend their bank deposits to avoid potential haircuts. However, fiscal drag is expected to weigh on disposable income and private consumption up to the first half of 2016.
The tourism sector continued to perform exceptionally well during the autumn. Imports are projected to continue declining faster than exports, resulting to net trade contributing positively to growth. Business confidence, reflected in the Economic Sentiment Indicator and the Purchasing Managers Index, has also recovered relatively quickly from the sharp falls in the summer. Economic sentiment stabilised in October and improved further in December.
Upward revision
Overall, the Commission΄s estimate for economic growth in 2015 has been revised upwards to 0.0%.
According to the European Commission, there will be a 0.7% of GDP recession in Greece for 2016.
In the second half of 2016, economic activity is set to strengthen supported by a rebound in confidence, the expected easing of capital controls, and compliance with the conditionality of the new ESM assistance programme. Investment should also benefit from the successful recapitalisation of the banks and the re-launch of privatisations.
Structural reforms
Steady implementation of structural reforms should gradually strengthen economic fundamentals, investment and other components of aggregate demand, leading to a projection of 2.7% for real GDP growth for 2017.
The report also shows that the rate of unemployment is slowly reducing, from 25.1% in 2015 to an estimated 24% in 2016 and 22.8% in 2017. Similarly, the European Commission expects the budget deficit in Greece to be 7.6% GDP in 2014, 3.4% in 2015 and 2.1% in 2017.
As for the Greek public debt, the European Commission’s report indicates that it will amount to 179% GDP in 2015 and is expected to increase to 185% GDP in 2016, before beginning to drop in 2017 (181.8%).
The inflation rate is projected at -1.1 pct in 2015, rising to 0.5 pct in 2016 and 0.8 pct in 2017, while investments are expected to shrink further (-8.4 pct in 2015, -3.7 pct in 2016) to rise by 12.8 pct in 2017.
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