Greek Economy To Shrink 5%

Greece will have to cope with an even deeper recession than expected in 2012, according to the country’s central bank. In a revision to its previous estimate a month ago, it suggests Athens will find it even harder to meet its fiscal targets, meaning yet more pain for the population, the Financial Times reported. The Bank of Greece forecast the economy will shrink by about 5 per cent this year – the fifth consecutive year of contraction – compared with its previous estimate of 4.5 per cent just a few weeks ago. But the outcome could be worse still if there are delays in implementing structural reforms, the bank said. This year’s contraction comes after a 6.9 per cent drop in 2011 and a cumulative shrinkage of more than 13 per cent since 2008. Latest estimates by the International Monetary Fund predicted contraction by 4.7 per cent in 2012, followed by zero growth next year. The Bank of Greece said unemployment would rise to more than 19 per cent this year from 17.7 per cent in 2011. Others, such as the IOBE think-tank, estimate unemployment will surpass 20 per cent this year. In addition to rising unemployment, private sector employees face payment delays as an increasing number of companies strive to cope with a drop in sales and scarce liquidity. The central bank sees pay for employees in the private sector falling by a further 16.5 per cent this year and next. Greece had one million companies in 2009, but 250,000 have since closed and 300,000 more do not pay their workers on time, according to Antonis Samaras, leader of the conservative New Democracy party. Read more. (Subscription required.)