Greek economy shrinks 5.3 percent in first quarter, pace of slump eases

ATHENS Wed May 15, 2013 5:36am EDT

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ATHENS (Reuters) - Greece's economy shrank 5.3 percent in the first quarter as expected, data showed on Wednesday, as austerity measures demanded by the country's foreign lenders continued to pummel consumption and investment.

The seasonally unadjusted data showed the recession - now in its sixth year - eased slightly from the 5.7 percent slump in the fourth quarter of 2012. Analysts polled by Reuters had also projected a 5.3 percent decline in economic output.

Greece has benefited from growing optimism over its future in recent months as fears of a euro zone exit fade, but its underlying economy has shown few signs of a recovery and unemployment remains at a record level of 27 percent.

"The data provides no signal of a bottoming out of the recession," said economist Platon Monokroussos at Eurobank.

"However, the recent bounce in economic sentiment and a strong tourism season are expected to lead to a gradual improvement in GDP dynamics in the coming quarters."

On Tuesday, ratings agency Fitch upgraded its sovereign credit rating for Greece by one notch, citing the country's progress in cutting its budget deficit.

That has helped push bond yields to a three-year low and the stock market also surged to a nearly two-year high on Wednesday.

Data on quarter-on-quarter changes were not provided.

The economy is seen contracting 4.2 to 4.5 percent this year before it starts to recover in 2014, based on European Comission and government forecasts. It slumped 6.4 percent last year.

After nearly crashing out of the euro last year and coming under attack for stalled reforms, Greece has won praise in recent months for getting back on track with deficit-cutting goals and pushing through unpopular austerity measures.

Source: Eurostat

(Reporting by George Georgiopoulos and Lefteris Papadimas, editing by Deepa Babington)

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