A return to marginal positive real GDP growth rates in 2016 will be followed by years of sluggish growth.
A slight improvement in 2016 will mainly be driven by the removal of capital controls and a slight uptick in consumer confidence.
These growth rates will be insufficient to help Greek households and firms recover from the huge destruction of wealth the country has endured during its depression.
One of the few bright spots for Greece is it current account, which is likely to remain in surplus over the coming years, having been at a deficit of over 10% of GDP only a few years ago.
Consumer price index (CPI) growth will remain in positive territory, due to a slight recovery in domestic demand, the ongoing impact of VAT hikes, and supply-side issues for the food sector.
The ruling Syriza administration will struggle to maintain popular support while implementing strict bailout fiscal consolidation plans and the number of migrants likely to arrive again in Greece in 2016.
Major Forecast Changes
We have revised up our estimate for real GDP growth to arrive at -0.3% in 2015, from a previous -1.6% forecast. This is due to the fact that coincident and lagging indicators showed the impact of political uncertainty and the imposition of capital controls were not as severe as we had previously expected.
Given Syriza's slim parliamentary majority, we do not rule out parliament voting against bailout conditions at some point. Depending on the degree of the rupture, such an outcome could lead to a collapse in the Syriza government. This would set Greece on a course for its third general election in under two years, which would be negative from an investment perspective.
|f = BMI forecasts. Source: National Sources/BMI|
|Real GDP growth, % y-o-y||0.7||-0.3||0.2||1.6|
|Nominal GDP, EURbn||177.6||175.5||177.1||182.2|
|Consumer price inflation, % y-o-y, eop||-2.6||0.4||0.9||1.3|
|Exchange rate EUR/USD, eop||0.83||0.95||0.91||0.87|
|Budget balance, % of GDP||-3.6||-3.7||-3.5||-3.0|
|Current account balance, % of GDP||0.9||2.0||1.6||1.3|
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