Flash Eurostat estimates showed the downturn in economic activity for the whole of 2010 was 4.52 percent, worse than the government's forecast decline of 4.2 percent, as it struggled to cut deficits and tackle debt.
Athens has been forced to impose stringent austerity measures as a condition of the 110 billion euro bailout it agreed with the European Union and International Monetary Fund last May to try to solve its debt crisis. The government projects GDP will decline 3.0 percent this year but sees light at the end of the tunnel, saying the first signs of growth will appear towards the end of the year. The central bank forecast in a monetary policy report on Tuesday that GDP may shrink by 3 percent or more in 2011.
"We expect the economy to bottom out in the second half of 2011 but after that we do not see a strong recovery taking hold, rather stagnation with growth rates around zero," said Christian Melzer, euro zone analyst at DekaBank. "The growth figures are miserable, the situation in the real economy is bad -- 2011 and 2012 are going to be difficult years for the Greek economy," he added.
Hopes pinned on exports
The government has said structural reforms to boost competitiveness and progress in slashing deficits will set the stage for stabilisation and a return to a sustainable, export-led growth path in 2012. While some encouraging pick-up in Greek exports has materialised, it has more to do with recovering demand in the global economy and less with competitiveness gains so far, according to the country's central bank.
Returning to growth is crucial for overborrowed Greece, especially after late 2012, when bailout funding runs dry. Its government will need to boost revenues to service a debt ratio projected to reach 157 percent of GDP in 2013.
"We expect fiscal austerity, a dire labour market, rock-bottom confidence levels and less availability of credit to keep driving renewed contractions in activity at least during the first half of this year," said Diego Iscaro of IHS Global Insight.
"The only hope is that exports can help to drive the economy out of recession as activity among trade partners strengthens during the second half of 2011. But, given Greece's weak external competitiveness and the fact that exports only represent less than 20 percent of the economy, this will be difficult."
Quarter-on-quarter, Greece's economy, which makes up about 2.5 percent of the euro zone, shrank 1.4 percent in the fourth quarter. Economists in a Reuters poll had forecast a contraction rate of 1.2 percent.
source: Reuters
