Greek recession to deepen in 2016, 1% drop in output: IOBE

Greece's recession will deepen this year with a decline in output of around 1%, the influential IOBE think tank said, as the country faces the full brunt of austerity measures imposed under a multi-billion euro bailout.

Wednesday's forecast dip in 2016 output was unchanged from a previous projection by IOBE made in April. Greece's economy contracted by 0.2% in 2015.

A raft of fiscal reforms will continue to affect private consumption and the impact will be deeper than that of 2015, IOBE said. Apart from four quarters of growth in 2014, Greece has been in recession since 2008.

Greece and its official creditors concluded a first review of compliance with economic reforms last month after Greece enacted a series of austerity measures ranging from tax hikes to elevated pension contributions.

 

"...Extensive fiscal reforms which were recently taken will clearly limit disposable income and consumption in the second half of 2016," IOBE said in its second quarterly report for the year. "Their effect is anticipated to have a bigger impact than of those taken last year."

In May, Greek lawmakers raised the country's sales tax and introduced a raft of new tax measures ranging from a rejig in income tax brackets to new income-based calculations of so-called "solidarity levy" rates designed to help the country's army of unemployed.

IOBE said it expected unemployment to fall marginally to 24.7% this year from 24.9% in 2015. Unemployment has remained high because weak demand and consumption have prevented job creation.

On the issue of Britain leaving the EU, IOBE said it saw only a "small" impact this year on tourism since the season was already in full swing and bookings made and mostly paid for by the time of the UK's June 23 EU referendum.

Britain is Greece's second-largest tourism market after Germany.