Greek GDP Forecasted to Contract 7% in 2012

Athens is keen to convince euro zone partners and the International Monetary Fund of its will to bring an economic adjustment plan back on track before asking for modifications and more time to spread out the pain of more cutbacks.

But the fiscal drag caused by the pursued austerity policies coupled with liquidity constraints and lingering uncertainty is likely to keep recessionary headwinds in full force.

“We project GDP to contract by 7.1 percent in 2012 and by 2.4 percent in 2013, on the back of further significant declines in disposable incomes, rising unemployment and plummeting investment activity,” Eurobank economist Theodore Stamatiou said.

Greece’s jobless rate has already climbed to 23.1 percent, with nearly 55 percent of those aged 15-24 out of work, a desperate situation that fed into the popularity of anti-bailout parties in elections earlier this year.

The three-party coalition government that emerged after two rounds of polls is working to nail down 11.5 billion euros of savings and plans to revive a labor measure targeting 40,000 public servants for eventual dismissal.

Without the additional savings the government’s budget will still show a primary deficit of 1 percent of GDP in 2014, well short of a targeted 4.5 percent surplus to help stabilize debt.

via CNBC

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