For Greece, the Worst Is Over: European Commission

The worst is over for Greece, whose economy is expected to expand next year for the first time since it was hit by the debt crisis, the European Commission’s autumn economic forecast revealed.

“The first half of 2013 was marked by an overall softening of the recession and the first signs of reaching the bottom of the cycle,” the EU executive arm’s forecast about Greece said.

Real gross domestic product has been contracting at a slowing pace, from shrinking by 5.7 percent in the fourth quarter of last year to a 3.8 percent contraction in the second quarter of this year.

Over the summer, a strong revival of tourism took place in Greece, whose competitiveness against other popular holiday destinations increased, the report noted.

The EC expects the Greek economy to contract by 4 percent this year, less than last year’s 6.4 percent contraction and 2011’s 7.1 percent.

Next year, GDP is forecast to expand by 0.6 percent, marking Greece’s exit from what many analysts have called a prolonged depression.

Unemployment is expected to peak this year at 27 percent and edge down by one percentage point in 2014.

Next year’s recovery in Greece’s economy will be led by exports and investment, with faster absorption of funds from the EU and the European Investment Bank (EIB) contributing to the re-launch of major projects, such as the construction of motorways.

Private consumption is still expected to fall, as disposable income is down.

The Greek recovery will gain strength in 2015 when it will grow by 2.9 percent, with investment the main driver, the EC’s forecast shows.

Investment is seen reversing its sharp contraction over the past few years by posting a healthy 5.3 percent advance next year and jumping by more than 11 percent in 2015.

However, the debt-to-GDP ratio, Greece’s main problem and the source of the crisis which spread throughout the eurozone, is expected to peak this year at little above 176 percent and fall only very slightly next year.

“After a marginal reduction in 2014, the debt ratio will decline more markedly in 2015 and beyond the forecast horizon as the fiscal balance continues to improve and economic growth resumes,” the European Commission’s forecast said.

Labour unions in Greece prepare to hold a general strike on Wednesday against austerity measures tied to the country’s bailouts.