Greece forecasts GDP growth in 2014 for 1st time in 6 years
Investment, exports to rise, government deficit to shrink after harsh austerity measures
The Greek government is forecasting economic growth of 0.6 per cent in 2014, which would be the first expansion of the economy in six years and could mark a turnaround for one of Europe's most financially troubled countries.
Greece's economy still is predicted to shrink by four per cent in 2013, the result of harsh spending cuts and tax increases it implemented to meet the terms of its international bailout.
But in a draft budget presented Monday, deputy finance minister Christos Staikouras said he sees a rise in investment and exports.
Staikouras also foresees a slight drop in Greece's catastrophic unemployment rate, at 27 per cent the highest in the eurozone. Next year, it's expected that 26 per cent of the population will be jobless.
Greece's economy was hit by the global financial crisis of 2008. But by 2009, it was clear that it could not handle its government debt load and the country teetered on the brink of bankruptcy in 2010.
In the last three years, Greece found itself in a painful recession with an unprecedented level of unemployment. Since this year, the sacrifices have begun to yield fruit, giving the first signs of an exit from the crisis,- Deputy finance minister Christos Staikouras
The EU and International Monetary Fund delivered two massive bailouts to keep Greece solvent, but Athens is still carrying substantial debt.
"In the last three years, Greece found itself in a painful recession with an unprecedented level of unemployment," Staikouras said at a press conference Monday after unveiling the draft budget.
"Since this year, the sacrifices have begun to yield fruit, giving the first signs of an exit from the crisis."
Chronic problems not yet fixed
Staikouras warned there are still austerity measures to come, despite the protests that have greeted the new taxes and cuts in the civil service.
"These positive developments must add impetus to our efforts and not allow any relaxation, because Greece's chronic structural and fiscal problems ... have not been fully addressed," Staikouras said.
By next year, the Greek government will owe the equivalent of 174.5 per cent of the country's annual output. Government spending is in a surplus position, excluding interest payments, but it still expects to run a deficit.
However, the deficit is now about 2.4 per cent of Greek GDP and is expected to remain at that level next year, a drop from more than 15 per cent three years ago.
Bailout lenders must approve budget
Greece's budget must be approved by its bailout partners. The country will need a third bailout to get through next year but is trying to negotiate lower interest rate terms from its lenders.
Staikouras said that Greece hopes to once again be able to borrow in international bond markets by late next year.
"It is our intention, and we are taking initiatives to ensure that access to markets becomes feasible in the second half of 2014," he said.
The potential turnaround has renewed interest in Greek banks by a group of U.S. hedge funds, including Paulson & Co.
The Financial Times is reporting Paulson & Co has substantial stakes in two banks, Piraeus and Alpha.
"The Greek economy is improving, which should benefit the banking sector," John Paulson told the paper. "[Both] are now very well capitalized and poised to recover [with] good management.”
With files from The Associated Press, Thomson Reuters