Greece’s economy will shrink more than the government expects in 2012 and 2013 even if it makes all structural changes laid out under the country’s bailout, the Organization for Economic Cooperation and Development said.
Gross domestic product will contract 5.3 percent this year and 1.3 percent in 2013, after shrinking 6.9 percent in 2011, the OECD said in a report published today. The European Commission forecast on May 11 that the Greek economy will contract 4.7 percent this year and show zero growth in 2013.
“These projections assume that the EU/IMF program of fiscal consolidation and structural reform is fully implemented,” the OECD said, referring to the bailout terms set by the European Union and the International Monetary Fund. “If the EU/IMF program were not implemented, the risk of debt default would rise sharply, with incalculable consequences.”
Greece is in the fifth year of a recession that has been amplified by austerity measures linked to the rescue, with the unemployment rate reaching 21.7 percent in February. A caretaker government was sworn in last week to lead the country to new elections on June 17 after an inconclusive poll on May 6 propelled the Syriza party, which wants to annul the bailout, into second place.
Greece’s budget deficit will drop to 7.4 percent of GDP this year and 4.9 percent in 2013 from 9.2 percent in 2011, the Paris-based OECD said. That compares with a target of 7.3 percent this year and 4.6 percent next year under the program.