From Growth to Collapse in Under 8 Months: The Evolution of Greece's 2015 GDP Growth Forecasts
Greece’s growth forecast for 2015 has followed an uninterrupted downward trend this year, dragged down by political turmoil and uncertainty over the country’s debt negotiations with international creditors. In January, FocusEconomics Consensus Panelists expected that the economy would record a second consecutive year of growth in 2015, forecasting a 2.0% expansion. This forecast was largely on the back of surprisingly positive economic data emerging from the indebted nation. Specifically, Q3 2014’s 1.9% annual expansion, which had marked the fastest pace of growth in over six years, suggested that the economy’s recovery was gaining traction and caused panelists to raise their forecast in January.
In February, panelist’s revised their forecasts down moderately as uncertainty regarding Greece’s future began increasing. Anti-austerity party SYRIZA had just won a decisive victory in Greece’s 25 January snap legislative election, signaling a major power shift in Greece. New Prime Minister Alexis Tsipras was sworn in after forming a coalition government and pledged to remove many of the former government’s austerity measures paving the way for an upcoming conflict with Greece’s international lenders. At that time, however, it was unclear how the new government would proceed with bailout negotiations and positive data limited the increased uncertainty’s impact on the forecast. FocusEconomics panelists revised their forecast down by 0.1 percentage points in February, projecting a 1.9% expansion in 2015.
Following February’s moderate deterioration, the decline in Greece’s economic prospects picked up pace rapidly. The FocusEconomics Consensus Forecast panel revised downward their outlook for Greece’s 2015 economy growth by 0.3 percentage points in March, 0.7 percentage points in April and 0.4 percentage points in May. By May, panelists were expecting the economy to expand a meagre 0.5% in 2015, down from the 1.9% expansion predicted in February. The rapid deterioration in Greece’s economic prospects were driven by rising political tensions between Greece and its international lenders as negotiations to unlock EUR 7.2 billion from the extended second bailout remained stalled. The funds were conditional on the country enacting a number of reforms, which were the stumbling block in the negotiations. Moreover, Greece was teetering on the edge of bankruptcy and Tspiras’ was facing an increasingly challenging domestic environment. Tspiras’ had campaigned on an anti-austerity platform and hard-left wing members of his coalition were criticizing the government’s actions. On the extreme side, the possibility of another snap election or even a “grexit” was beginning to place downward pressure on the forecast.
Positive economic data led to a temporary halt in the weakening of Greece’s forecast in June. The forecast remained unchanged at May‘s 0.5% projected expansion. The result was driven by a slightly larger-than-expected expansion in the first quarter and industrial production tallying the largest increase in almost five years in March. However, the stable outlook was short-lived and, in July, the panel downgraded Greece’s forecast by 0.6 percentage points, forecasting a contraction for 2015. The rapid worsening was largely due to the abrupt end of negotiations between Greece and its international lenders following Tsipras’ surprise call for a referendum on 5 July over an extended bailout program. The announcement came just a few days before the bailout program’s expiration and an IMF loan repayment deadline on 30 June. The building drama caused panelists to downgrade their projections and forecast a 0.1% contraction for 2015.
The rapid decline continued in August, despite a tentative agreement signed on 13 July designed to keep Greece in the Eurozone. FocusEconomics Consensus Panelists cut their 2015 forecasts by 1.1 percentage points and now expect the economy to contract 1.2%. While the agreement bodes well for the country’s depleted finances, a large risk of foot-dragging by the Greek government or political upheaval in the future could threaten long-term success of the program. Moreover, a number of participants still believe that the risk of a “grexit” is large and that economic growth will struggle to gain momentum in the medium-term.
Author: Angela Bouzanis, Senior Economist
Date: August 10, 2015
TagsPortugal UK South Africa Commodities Vietnam Forex Oil Exchange Rate Japan Fed IMF Consensus Forecast Panelists Euro Area Mexico Energy Commodities Italy Eastern Europe MENA NAFTA Nordic Economies Banking Sector Infographic precious metals Canada United States Turkey Spain Agricultural Commodities Venezuela Russia World Bank India Brexit Africa Financial Sector OPEC Major Economies Ukraine Industrial Metals Commodities Iran Brazil Economic Growth (GDP) Investment Asia Germany Colombia oil prices Argentina Base Metals Commodities G7 China European Union Greece Company News Latin America Precious Metals Commodities Sub-Saharan Africa Trade Tunisia Gold Unemployment rate Housing Market Emerging Markets Australia USA Inflation France United Kingdom
Sub-Saharan Africa GDP 2018 Forecast: analysts slash forecasts on political risks https://t.co/myw4vXbCDM
2 hours ago
How will China’s upcoming National Congress of the Communist Party shape the economic and political future? https://t.co/0wYwPd07q7
7 hours ago
Sub-Saharan Africa is in a precarious situation with a myriad of political risk causing analysts to cut 2018 outlook https://t.co/aqSXcIHbi2
19 hours ago
1 day ago
The Colombian Ministry of Mining & Energy confirms official endorsement for Pacific Alliance Energy Forum. Register… https://t.co/mbUlPsPOYk
1 day ago
- Emerging Markets Are Kicking Into Higher Gear In 2017
- Why is foreign direct investment in Latin America falling again?
- Are Central Banks Nationalising the Economy?
- Bounty or burden? The impact of refugees on European economies is far from clear
- What’s the future of U.S.-Latin America trade relations?
- Taxes or cutbacks? Latin America's challenge of sustaining spending without causing debt to skyrocket
- Are uranium prices making a comeback?
- Taxing the Economy: Achieving a Delicate Balance
- Is the UK really "shackled to a corpse"?
- How will Latin America’s upcoming lengthy election cycle affect the reform agenda and credit ratings?
- How will emerging market economies perform in 2017?
- Chilean Economy in Focus: Interview with Senior Economist of the Chamber of Commerce of Santiago
- CEOs Rank Top Economies for Growth Opportunities
- The Mobile Ecosystem & Latin America's Economy
- Prospects and Challenges for the Global Economy: Interview with Tim Cooper from BMI Research
- How will the Fed reduce its balance sheet & and how will the ECB end QE? - 19 economic experts weigh in
- Thoughts on "unwinding" QE from Frances Coppola
- Gold: The Most Precious of Metals (Part 3)
- The Fed and ECB at a crossroads: Unwinding QE
- Spain: The economy that continues to silence the critics
- Latin America: The Most Unequal Region in the World
- The History of OPEC: Has it been a Success?
- FocusEconomics Announces 2017 Analyst Forecast Awards Winners
- Latin America’s rising unemployment bucks nearly decade long trend
- Escape from the Central Bank Trap by Daniel Lacalle
- China's economic rebalancing act: What to look out for in 2017
- Driving Growth in Latin America: Challenges & Priorities
- Is the Global Economy Rebalancing?
- Commodity exporters face challenging times
- Recent Global Events Facilitate Mercosur-Pacific Alliance
- 23 economic experts weigh in: Why is productivity growth so low?
- Mexico's outlook as Trump nears 100-day mark
- Interview with Oxford Economics Senior Economist on implications of the possible outcomes of the French Presidential Election
- The anxiety of the small saver in a world of negative interest rates
- Brexit negotiations. Between Uncertainty and Urgency
- An Economic History of the EU from El Blog Salmón
- Baby Boomin': Implications of high population growth in Latin America
- Survey of International Economists Predicts a Le Pen Defeat in French Elections, Says Macron has Best Economic Plan
- Spain in a global context: developed economy with some challenges
- How much is crime costing Latin America?
- Predictions & Estimates from Economist Daniel Lacalle
- What economy will the new Dutch government inherit?
- “The data is not a true reflection of reality in India” Interview with Société Générale India Economist
- 2017 & 2018 Economic Outlook for the Top Oil Producing Countries
- Which countries will have the highest and lowest inflation in 2017?
- What are the prospects for Emerging Economies in 2017?
- What to expect in Asia for 2017
- Top Economics & Finance Blogs of 2017
- Latam to Resume Moderate Growth in 2017 but Important Risks Plague Outlook
- 4 Key European Elections That Will Impact the Economy in 2017
- How are security concerns and political chaos affecting Turkey’s economy?
- Global growth to edge up in 2017
- Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017
- What does Donald Trump mean for the U.S. economy?
- How will emerging markets perform in 2017?
- The economic impact of a break in U.S.-Philippines ties
- Trump election: Base metals surge due to infrastructure plan
- 5 updates on the Venezuelan economic crisis
- Canada: When your neighbor’s house is on fire…
- Short-term pain before long-term gain? A look at French labor reform and economic growth
- Asia: Unremarkable growth & unfulfilled promises?
- How India's latest monsoon is affecting the economy
- Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
- Russian economy update in wake of OPEC deal announcement
- The Wisdom of the Crowds and the Consensus Forecast
- Can the peso predict the U.S. election results?
- There's no end in sight to the Venezuela crisis
- A Look at the European Union Political Calendar
- Survey of international economists shows uncertainty surrounding elections damaging U.S. growth prospects
- FocusEconomics partners with leading online statistics provider Statista
- China: Recent postive economic data may be papering over the cracks
- Sub-Saharan Africa's 2016 & 2017 growth rates
- The Italian Dilemma: Weak banks pose risk to already faltering domestic demand
- How much money do migrants from Latin America send home?
- The U.S.' (Not So) Mysterious Case of the Missing Men
- What to expect from the G20 economies by 2020
- The Pain in Spain: Robust GDP growth cannot mask the persistent structural deficit