Greek economy to shrink 4.5% this year, may recover next year: Bank Of Greece
2013-02-25 16:15:03
The Greek economy will likely remain in recession this year and unemployment will continue to rise before fiscal conditions start improving next year, and the government should takes steps to expedite structural reforms to combat recession, Bank of Greece Chief George Provopoulos said Monday.
Addressing the bank's shareholders meeting, Provopoulos cautioned that though the eventuality of Greece exiting the Eurozone has been reduced significantly, and confidence is gradually being restored there is no room for complacency.
The central bank forecasts that the economy would shrink by 4.5 percent this year, which is slightly more than the 4.4 percent contraction the European Commission has predicted.
"For sure, 2013 will be a tough year, mainly due to the ongoing recession and high unemployment. But we can expect that the recession will gradually ease and in 2014 we will see gradual positive signs for GDP," the central bank chief said.
Signaling improvement in the economy, both the general government deficit and the corresponding primary deficit were reduced by 9 percentage points of GDP between 2009 and 2012, while structural deficit fell by 15 percentage points. The current account deficit shrank to 2.9 percent of GDP in 2012, down from a peak of almost 15 percent in 2008.
"In any event, the recession cannot be used as an excuse for not honoring the commitments made and, particularly, for any relaxation in the effort to promote the necessary reforms", Provopoulos noted.
According to him, for real economic recovery to happen in the near term, it is imperative to continue implementation of the adjustment program, with strict adherence to the targets and timetables set. Also, the country's productive capacity should be re-based on new foundations - driven by strengthening its export orientation - by shifting resources towards the production of competitive, internationally tradable goods and services.
At the same time, authorities should ensure the effective use of the EUR 18.3 billion fund available to Greece in the form of Structural Funds for the 2014-2020 period.
Steps should also be taken to create suitable conditions for easing the tax burden on those who already pay taxes, and to reform the banking sector by restoring normal liquidity conditions, the central bank chief said.