UPDATE 1-Greek Q1 GDP shrinks 0.8 pct, worse expected to come

* Greek Q1 GDP – 0.8 pct q/q, -2.3 pct y/y

* Drop not as bad as expected

* Analysts expect worse to come as austerity bites

(Adds analyst comment, details)

ATHENS, May 12 (BestGrowthStock) – Greece’s economy shrank less than
expected in the first three months of the year but the
debt-ridden country was still firmly in recession which is
expected to deepen, while the rest of the euro zone grows.

Data released on Wednesday showed Greek GDP contracted 0.8
percent in the first quarter compared to the last quarter of
2009, better than the 1.4 percent drop forecast by economists
polled by Reuters.

The overall euro zone grew for the third quarter in a row —
by 0.2 percent in the latest three months — and analysts
forecast the contraction of the Greek economy would accelerate.

“The contraction of economic activity is continuing at about
the same pace on a quarterly basis as domestic demand falls on
the background of declining disposable income and increased
uncertainty,” said Nikos Magginas, economist at National Bank of

“The pace of contraction of economic activity is expected to
accelerate in the following two quarters as a result of a
further decline in the disposable income from the additional
austerity measures and mounting uncertainty over near-term
macroeconomic prospects.”

In return for emergency aid from euro zone nations and the
International Monetary Fund, Athens has committed to deep budget
cuts, that have already caused violent public protests in the
country, which if enacted will choke economic activity further.

The Greek economy shrank by 2.3 percent year-on-year in the
first three months of the year, the Eurostat data showed, also
less than the 2.7 percent drop forecast by economists.

Eurostat revised Greece’s Q4 year-on-year contraction to 2.6
percent from 2.5 percent.

“The better than expected data for the gross domestic
product both month-on-month and year-on-year are the result of a
more successful than projected capture of the black economy,”
said Constantinos Vergos, analyst at Cyclos Securities.

The Greek government has pledged to step up its fight
against widespread tax evasion as part of a multi-billion euro
plan to cut its ballooning budget deficit.

“Given this data, the annual GDP drop could be smaller than
the government’s -4.0 percent forecast this year, because
capturing the black economy could contribute about 5-6% to the
GDP. I think that the government will finally meet its deficit
target this year,” Vergos said.

KEY FIGURES (pct) Q1 2010 Q4 2009 Q3 2009 Q2 2009
GDP (y/y) -2.3 -2.6 -2.5 -1.9
GDP (q/q) -0.8 -0.8 -0.5 -0.3

Stock Analysis

(Reporting by Ingrid Melander and Angeliki Koutantou; Writing
by Ingrid Melander, editing by Mike Peacock)

UPDATE 1-Greek Q1 GDP shrinks 0.8 pct, worse expected to come