PARIS Nov 27 Greece's recession will drag on
longer than currently foreseen, the OECD said in a report on
Tuesday, urging Athens to focus on reforms to kickstart its
economy rather than cutting its deficit at all costs.
The economy will not recover before 2015, after seven
consecutive years of recession, the Organisation for Economic
Co-operation and Development predicted in its economic outlook.
That is a year longer than currently forecast by the country's
government, which expects the economy to recover in 2014.
"A return to positive growth is projected only towards the
end of 2014 as world trade strengthens, confidence returns and
competitiveness improves," said the OECD, which expects Greek
GDP to shrink by 1.3 percent in 2014, compared with a growth
forecast of 0.2 percent that year by the Greek government.
Greece's economy has shrunk by more than a fifth since its
recession started in 2008, hit particularly by severe austerity
measures imposed by the country's international lenders to
finance its rescues.
Greece adopted yet another round of austerity measures
earlier this month, aiming to shrink its budget deficit to 3.2
percent of GDP in 2016 from 9.4 percent last year.
If a weaker than expected economy scuppers this plan, Athens
should not blindly focus on meeting its fiscal targets, but
allow social spending to absorb some of the recession and focus
on structural forms to boost growth, the OECD said.
"The agreed consolidation measures should be put in place,"
said the Paris-based organisation. "But if growth proves lower
than assumed in the government's fiscal plans, then the
automatic stabilisers should be allowed to operate, even if this
means missing the set targets."
"The most vulnerable in Greek society need to be better
protected from cuts in social spending," the OECD said.
Greek households' disposable income shrank by about 14
percent year-on-year in the second quarter of 2012, statistics
agency ELSTAT said last week, as wages dropped by 15 percent and
social benefits by 9.5 percent. Taxes soared by 37 percent over
the same period, ELSTAT said.