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Greek Recession May Bottom Out In 2013

Greece’s recession is unlikely to bottom out until sometime in 2013, an International Monetary Fund official said Thursday, though the country should be able to return to growth if it implements changes being forced on it by its international creditors.
Gerry Rice, the IMF’s director of external relations, told reporters that the latest Greek rescue program should give officials in Athens the ability to implement austerity measures and begin to turn the country’s economy around.
“The intention here is to give Greece much more breathing space…time to implement the reforms, to get back to competitiveness, to get back to growth,” he said.
The IMF currently projects that Greece’s economy will continue to deteriorate into next year. Rice said Greece, if it implements the agreements agreed to with private and public sector creditors, could return to a modest and “realistic growth path” over the medium-term. He acknowledged there were risks to the success of the new package, which targets a 120.5% debt-to-GDP goal for Greece by 2020.
“I don’t think anyone is trying to say those risks are not there,” he said.
EU sees Greek recession deepening in 2012
Greece΄s economy is seen contracting at an annual pace of 4.3% in 2012, versus a previous forecast for a downturn of 2.8%, the European Commission said Thursday, according to Dow Jones Newswires.
In an interim report, the Commission said it sees substantial downside risks to Greece΄s economy mirrored by very low consumer and business confidence.
“Apart from the weakening external demand, domestic demand is set to contract given the expected acceleration of the labor market adjustment, with wage cuts in the private sector,” it said.
Exports are set to be less dynamic than in previous years, it added, while imports will continue to be hit by weak domestic demand, helping the external sector make a positive contribution to the economy.
Stumbling through its fifth year of recession this year, Greek economic output contracted at an annual pace of 6.8% in 2011.
Despite the deep recession, Greece΄s inflation rate reveals deep inflexibility in product and services markets, the report added.
“In 2012 the price rise trend is expected to be reversed, resulting in slight deflation of 0.5%. The main driving force stems from anticipated falls in disposable income and consumer spending due to wage cuts in the private sector,” it said.
In regards to Cyprus, the Commission forecast the economy to contract by 0.5% year-on-year, after growth of 0.5% in 2011, due to a worsening external environment and the adoption of consolidation measures.
(source: Dow Jones)

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