IMF forecasts two-year recession

Greece’s economic recession this year will not be as severe as first thought but the economy is expected to keep shrinking in 2010, according to the International Monetary Fund. The Washington-based IMF said in an annual global outlook released yesterday that the Greek economy is likely to shrink by 0.8 percent in 2009, revising a previous estimate for a contraction rate of 1.7 percent. For 2010, the IMF said it sees the economy shrinking at an annual pace of 0.1 percent. Greece is moving toward its first recession in 16 years after some 10 years of robust growth between the mid-90s and 2006. Tourism and shipping, two of the country’s key sectors, have seen revenues fall sharply due to the global crisis as many travelers holidayed closer to home this year and global trade plunged. The head of the National Statistical Service, Manolis Kontopyrakis, was cited by the press earlier this week as saying that Greece’s economy will contract on an annual basis for another two quarters. He expects the economy to shrink by less than 1 percent this year. Turning to the eurozone, the IMF sees the 16-nation group shrinking by 4.2 percent this year before expanding by 0.3 percent next year. «The recovery may be more sluggish than expected if conditions in the financial and corporate sectors get worse and if unemployment rises faster than currently anticipated,» the IMF said. Expected news on the job front for Greece is grim with the unemployment rate seen rising to 10.5 percent in 2010, from 9.5 percent this year. The forecast, however, is slightly better than the expected average of 11.7 percent in the euro area. In Spain, the IMF sees unemployment at 20.2 percent next year and in Cyprus 5.9 percent. Unemployment in the eurozone rose to a new 10-year high of 9.6 percent in August, EU statistics revealed yesterday. [email protected]