Greece returns to growth

Greece’s economy unexpectedly returned to growth in the second quarter despite political turmoil and the threat of a Greek eurozone exit, data showed yesterday.

In a boost for Prime Minister Alexis Tsipras’s leftist government, revised data also showed that Greece posted no growth or decline in economic output in the first quarter instead of a previously reported 0.2% contraction.

That meant the country did not enter into a recession at the start of the year as previously believed — a slide that was expected to have been exacerbated by Mr Tsipras’ hard line against the austerity imposed by international lenders.

GDP expanded 0.8% from April to June, based on seasonally adjusted estimates. No official data was provided on what drove the growth as these are preliminary figures. But analysts said some sectors, such as the tourism mainstay of the economy, had shown ability to withstand the uncertainty stemming from months of deadlocked talks with foreign lenders.

“Some economic activity indicators in the second quarter, including consumption, industrial production and tourism, had shown particular resilience,” said economist Nikos Magginas at National Bank. “This explains the surprising second quarter GDP reading.”

He said the data helped shape a more favourable outlook for the year as a whole, rendering the prospect of an overall contraction of less than 2% for 2015 “realistic”.

Under the baseline scenario Greece agreed with international creditors in the new bailout agreement, Greece’s economy is projected to shrink 2.1%-2.3% this year. Greece’s economy emerged from a six-year recession in 2014 but shrank in the final quarter as political upheaval returned.

More recently, and not captured in yesterday’s data, economic activity was sharply hit by the imposition of capital controls and a three-week shutdown of banks starting June 29.

The Greek parliament yesterday was preparing to approve a new €85bn bailout deal with the EU that Greece needs to avoid defaulting on a debt repayment next week.

And Mr Tsipras’s Syriza party looked set to split after the leader of its far-left faction called for a new movement to fight the deal. Days after striking an agreement with foreign creditors, Mr Tsipras is asking parliament to approve an agreement that pledges tax hikes and spending cuts in exchange for the fresh loans.