The Greek economy is expected to contract more than 4.5% of GDP in the second half of the year, according to provisional estimates by the Bank of Greece.
Other estimates take into account adverse scenarios on Greek tourism industry for the year and say that the contraction will reach 5.5%.
The BoG does not adopt the estimates on a significant drop in tourism and argues that tourism figures will not confirm the originally extremely negative forecasts.
Nevertheless, state revenue and expenditure point to acceleration of the downturn. In the first seven months of the year, the reduction of public spending is growing twice as fast compared to the goal because revenue growth is just half compared to the estimates. This reflects the difficulty of the government to collect taxes and a sharp decline in private economic activity.
The cutback of government spending and the sharp decline in private economic activity as indirectly recorded in reduced imports and exports, is reflected in the decline of the building industry at rates greater than 22% until May and in a constant drop in industrial production with few exceptions.
This will deteriorate in the second half of the year government officials acknowledge. Although a partial improvement in public expenditure and revenue is expected due to late registration of income from increases in excise and indirect taxes as well as the results from reductions in benefits and wages in the public sector.
The Finance Ministry is accelerating the procedures to improve the absorption of available EU funds before 2010 but the difficulties in preconditions for securing national resources may still exist.
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