Greece’s growth forecast for 2015 has followed an uninterrupted downward trend this year, dragged down by political turmoil and uncertainty over the country’s debt negotiations with international creditors. In January, FocusEconomics Consensus Panelists expected that the economy would record a second consecutive year of growth in 2015, forecasting a 2.0% expansion. This forecast was largely on the back of surprisingly positive economic data emerging from the indebted nation. Specifically, Q3 2014’s 1.9% annual expansion, which had marked the fastest pace of growth in over six years, suggested that the economy’s recovery was gaining traction and caused panelists to raise their forecast in January.

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© FocusEcononmics 2015 www.focus-economics.com
From Growth to Collapse in Under 8 Months:
The Evolution of Greece's 2015 GDP Growth Forecasts
Greece’s growth forecast for 2015 has followed an uninterrupted downward trend this year,
dragged down by political turmoil and uncertainty over the country’s debt negotiations with
international creditors. In January, FocusEconomics Consensus Panelists expected that the
economy would record a second consecutive year of growth in 2015, forecasting a 2.0%
expansion. This forecast was largely on the back of surprisingly positive economic data emerging
from the indebted nation. Specifically, Q3 2014’s 1.9% annual expansion, which had marked the
fastest pace of growth in over six years, suggested that the economy’s recovery was gaining
traction and caused panelists to raise their forecast in January.
In February, panelist’s revised their forecasts down moderately as uncertainty regarding
Greece’s future began increasing. Anti-austerity party SYRIZA had just won a decisive victory
in Greece’s 25 January snap legislative election, signaling a major power shift in Greece. New
Prime Minister Alexis Tsipras was sworn in after forming a coalition government and pledged to
remove many of the former government’s austerity measures paving the way for an upcoming
conflict with Greece’s international lenders. At that time, however, it was unclear how the new

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© FocusEcononmics 2015 www.focus-economics.com
government would proceed with bailout negotiations and positive data limited the increased
uncertainty’s impact on the forecast. FocusEconomics panelists revised their forecast down by
0.1 percentage points in February, projecting a 1.9% expansion in 2015.
Following February’s moderate deterioration, the decline in Greece’s economic prospects picked
up pace rapidly. The FocusEconomics Consensus Forecast panel revised downward their
outlook for Greece’s 2015 economy growth by 0.3 percentage points in March, 0.7 percentage
points in April and 0.4 percentage points in May. By May, panelists were expecting the economy
to expand a meagre 0.5% in 2015, down from the 1.9% expansion predicted in February. The
rapid deterioration in Greece’s economic prospects were driven by rising political tensions
between Greece and its international lenders as negotiations to unlock EUR 7.2 billion from the
extended second bailout remained stalled. The funds were conditional on the country enacting
a number of reforms, which were the stumbling block in the negotiations. Moreover, Greece was
teetering on the edge of bankruptcy and Tspiras’ was facing an increasingly challenging
domestic environment. Tspiras’ had campaigned on an anti-austerity platform and hard-left wing
members of his coalition were criticizing the government’s actions. On the extreme side, the
possibility of another snap election or even a “grexit” was beginning to place downward pressure
on the forecast.
Positive economic data led to a temporary halt in the weakening of Greece’s forecast in June.
The forecast remained unchanged at May‘s 0.5% projected expansion. The result was driven by
a slightly larger-than-expected expansion in the first quarter and industrial production tallying the
largest increase in almost five years in March. However, the stable outlook was short-lived and,
in July, the panel downgraded Greece’s forecast by 0.6 percentage points, forecasting a
contraction for 2015. The rapid worsening was largely due to the abrupt end of negotiations
between Greece and its international lenders following Tsipras’ surprise call for a referendum on
5 July over an extended bailout program. The announcement came just a few days before the
bailout program’s expiration and an IMF loan repayment deadline on 30 June. The building
drama caused panelists to downgrade their projections and forecast a 0.1% contraction for 2015.
The rapid decline continued in August, despite a tentative agreement signed on 13 July designed
to keep Greece in the Eurozone. FocusEconomics Consensus Panelists cut their 2015 forecasts
by 1.1 percentage points and now expect the economy to contract 1.2%. While the agreement
bodes well for the country’s depleted finances, a large risk of foot-dragging by the Greek
government or political upheaval in the future could threaten long-term success of the program.
Moreover, a number of participants still believe that the risk of a “grexit” is large and that
economic growth will struggle to gain momentum in the medium-term.