The euro zone's weak southern states should post economic growth in 2014, though it may be lacklustre, and they will make grindingly slow progress on narrowing their budget deficits, a Reuters poll showed. Monday's poll of 31 economists showed Greece, Portugal and Spain would all achieve a modicum of economic growth next year, although that will do little to make up for the declines in their economies over the last few years.
It will also do little to seriously dent their double-digit unemployment rates. Ireland, one of the bloc's economies hit hardest by the global financial crisis, is expected to fare better. The survey also showed that Greece aside, government efforts to cut budget deficits will progress at a slower pace than the International Monetary Fund expected in October's World Economic Outlook. The forecasts were broadly similar to the findings of a poll in August. Below are summaries for each country.
GREECE Athens and its international lenders expect the economy to recover next year after six straight years of recession that have left the economy about a quarter smaller and unemployment at a record of almost 28 percent. Greece has been on an EU/IMF lifeline since 2010 with loans granted in exchange for spending cuts and reforms to correct its fiscal imbalances and make its economy more competitive.
The poll showed Greece's economy will grow just 0.2 percent next year. EU/IMF projections forecast its battered economy contracting 4 percent this year before recovering modestly in 2014. This would bring the total GDP decline in 2008-2013 to 25 percent, making it the country's deepest peace-time depression.
With that record, perhaps the only positive is that things can only improve. "The economy is very close to stabilising," said economist Nikos Vettas, head of Athens-based think tank IOBE. Greece hopes its euro zone partners and the IMF will provide further debt relief once it attains a small primary budget surplus this year, excluding debt servicing costs.
SPAIN The euro zone's fourth-largest economy should eke out growth of around 0.6 percent next year, economists said, after it shrinks an expected 1.4 percent this year. The Bank of Spain predicted the country emerged from a two-year recession in the third quarter with quarterly growth of 0.1 percent, a figure expected to be confirmed by the National Statistics Institute on Wednesday.
However, respondents forecast little improvement in the unemployment rate - second only to Greece as the euro zone's worst - next year. Data last week showed it was 26.0 percent in the third quarter, and the poll shows it little changed from that by the end of next year. The poll also showed Spain's budget deficit should fall to 6.5 percent this year and then 6.0 percent in 2015, still far above the EU's target rate of 3 percent.
IRELAND Due to complete its 85 billion euro bailout in December, Ireland is being held up as a model of austerity working, although drawing parallels with other indebted euro zone states is difficult due to their other structural problems. The Irish economy emerged from recession in the second quarter and is expected to pick up in 2014 with the government, which presented its seventh austerity budget in six years this month, banking on an increase in personal consumption to reach growth of 2 percent.
The poll showed the economy will grow 1.8 percent next year, after essentially flatlining this year. Dublin expects the budget deficit to fall to 7.3 percent of gross domestic product this year, a sharp drop from nearly a third in 2010 but still the highest in the EU.
PORTUGAL Portugal's economy emerged in the second quarter from its deepest recession since the 1970's, in the wake of painful austerity measures applied under its 78 billion euro bailout. The government expects it to have grown again in July-September. For all of 2013, however, it still expects the economy to shrink 1.8 percent before returning to annual growth, of 0.8 percent, in 2014 - the year the bailout ends. The poll consensus was less optimistic about next year - it shows growth of only 0.3 percent.
The government has said it is likely to need a precautionary credit line next year as a safety net for Lisbon's planned return to full market financing. "The tendency is more of stabilisation than recovery for now. New wage and pension cuts announced for 2014 could provoke consumer caution in the last quarter," said Teresa Gil Pinheiro, an economist at Banco BPI. "But if the economy shrinks it should be an isolated quarter and the general trend should be for further expansion."
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