Greek recession on tourism slump

ATHENS, July 13 (Reuters) – Greece’s central bank expects the country’s economy to shrink by up to 1 percent this year, compared to a previous zero growth forecast after weaker than expected tourism data, Bank of Greece officials said on Monday.

This adds to evidence that the Greek economy is heading towards its first recession since 1993 this summer, as the world economic crisis weighs on tourism, construction, shipping and private consumption, the country’s biggest growth drivers.

‘We expect the contraction to be between 0 and 1 percent,’ a Bank of Greece official who declined to be named told Reuters.

Deteriorating economic data forced the Greek government last month to cut its optimistic 1.1 percent growth forecast to zero.

But analysts and international organisations expect the economic slump to be even deeper. The IMF said in May it expects the economy to contract by up to 2 percent. The European Commission forecast a 0.9 percent drop.

‘I think the contraction will be about 2 percent in 2009, mainly because of the downturn in tourism and shipping,’ Chris Pryce, an analyst for Fitch Ratings, told Reuters.

Athens hotel owners said on Monday their revenues were down 20 percent from last year between January and May. About 19,000 jobs in tourism were lost after a 9.6-percent drop in visitor numbers, industry association SETE said last week.

Tied down by budget deficits and a booming debt, Greece’s government cannot afford a stimulus package for the economy. It has announced a string of new taxes and other measures to increase state revenuews.

The government, which has a one-seat majority in parliament and may have to call early elections by March, said last month it would raise 1.9 billion euros ($2.64 billion) from higher taxes on lottery winnings, mobile phones, cars and property.

The budget is also strained by high interest payments to service the country’s debt, the European Union’s second-highest in terms of GDP after Italy, at 97.6 percent last year.

Greece borrowed about 50 billion euros from international markets in the first six months of the year, equivalent to about a fifth of the country’s GDP.

Construction and private consumption are also stalling after years of robust growth. According to April figures released last week, building activity plummeted by 39 percent year-on-year in terms of volume and retail sales fell 15 percent.

(For a factbox on economic forecasts for Greece click on )

(Editing by Stephen Nisbet) ($1=.7189 Euro) Keywords: GREECE ECONOMY/

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