Good news in Greece? Strong tourism revenue puts dent in recession

ATHENS - The Associated Press

Published Friday, Sep. 06 2013, 2:19 PM EDT

High tourism revenues helped Greece’s battered economy shrink less than initially estimated in April-June, making a projected exit from a six-year recession in 2014 more likely. The country’s statistical authority said Friday that the second quarter contraction was 3.8 per cent of gross domestic product year-on-year - considerably better than last month’s flash estimate of 4.8 per cent, and the lowest in three years. This provides a morale boost to the conservative-led government, which in coming weeks faces a tough inspection of the country’s austerity program by its international creditors.

   Greece has received more than €200-billion ($274-billion) in rescue loans over the past three years, in exchange for harsh income and welfare cuts that hurt the economy and pushed unemployment to record highs. But it is still unclear whether the country will be able to pay down its debt after the bulk of the loans run out next summer, and potential new aid would probably come on condition of further austerity.

   Analyst Vangelis Agapitos warned that it is still too early to say whether the projected return to growth next year can be achieved, as the government elected in June 2012 is showing signs of reform fatigue. “The government must continue on the course it has followed over the past 14 months,” Agapitos said. “The economy has to be fully turned round from a model based on domestic consumption and a big public sector to a more outward-looking and internationally competitive model.”

   The statistical authority said Friday’s GDP revision was based on data not available when the preliminary estimate was issued. These included a 5.3-per-cent turnover increase in accommodation and food services in April-June - compared to a 21-per-cent fall a year earlier - and a strong improvement in the external trade deficit, largely attributed to lower demand for imported goods due to the recession.

   The revised GDP figures were chiefly helped by a boom in the key tourism industry, which accounts for more than 15 per cent of the Greek economy and sustains about one in five jobs. “The remarkable rise in tourism definitely had an extremely positive effect on the economy,” Agapitos said. Tourism officials expect a record 17 million arrivals this year - up from 16 million in 2012.