Greek economy shrinks 0.6 percent in fourth quarter, contraction pace slows

ATHENS (Reuters) - Greece’s economy contracted in the last three months of 2015 but by less than expected, flash estimates by Eurostat showed on Friday, as fiscal austerity and capital controls continued to weigh on investment, exports and consumer spending.

A Greek national flag flutters atop the parliament building in Athens, Greece, October 30, 2015. REUTERS/Alkis Konstantinidis

The 0.6 percent decline in gross domestic product from October to December compared to the previous quarter, based on seasonally adjusted data. Economists polled by Reuters had forecast a 0.9 percent contraction quarter-on-quarter.

A previously reported 0.9 percent contraction in the third quarter was downwardly revised to -1.4 percent.

“The data point to a full-year real GDP contraction of 0.7 percent, slightly worse than this year’s budget forecast of zero percent but better than what was expected by the EU Commission a few months earlier, its -1.4 percent projection,” said Eurobank economist Platon Monokroussos.

The flash estimate points to a negative carry-over for this year of about 1.1 percentage points, he said.

“For full-year 2016 we continue to expect a contraction of 1.0 percent but see scope for improvement in GDP dynamics in the second half if there is a successful completion of the first (bailout) review within this quarter,” Monokroussos said.

Reforming Greece’s ailing pension system is a prerequisite for the conclusion of a bailout review, which is expected to open the way for debt relief talks, but the government is facing protests from farmers and other groups of workers.

Greek riot police clashed with farmers in central Athens on Friday ahead of a major planned demonstration against the pension reform.

Friday’s data also showed Greece’s 173 billion euro economy shrank by 1.9 percent on an annual basis in the fourth quarter, a rate unchanged from the third quarter.

Economists had been expecting a year-on-year contraction of 1.5 percent in the last quarter of 2015.

Reporting by George Georgiopoulos; Editing by Gareth Jones