The Ernst & Young rating agency has issued a study, according to which any discussion about the recovery of the Greek economy is “premature”, since it estimates that the Greek GDP will shrink by 0.5% in 2014.
The Eurozone Forecast Spring 2014 report notes that despite the improvement in finances (such as the stabilization of unemployment), tension still dominates in the political scene, with creditors and partners pressuring the coalition government to expedite structural reforms.
According to the report, the surplus workforce will push wages down in the short term, which in turn will affect household wages and nullify whatever relief the slight drop in consumer prices may have provided. Ernst & Young estimates that consumer expenses will further shrink by 1% in 2014.
With Greece unable to rely upon the domestic market, it will have to focus on international trade, with results so far being mixed. Nevertheless, the rating agency claims that the overall improvement in Eurozone could contribute towards a development of competition and initiate reforms. Fixed capital investments are expected to marginally increase in 2014 and by 6% over the 2015-2018 period.
