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Greek recession worse than forecast next year

The country — which risks running out of money in two weeks — will run a bigger public deficit than forecast a month ago in a previous draft and the economy is expected to shrink by 4.5 percent in 2013, compared with the previous forecast of 3.8 percent.

The new forecast nonetheless predicted that Greece’s recession would ease next year, with the forecast for 2012 being that the economy will shrink by 6.6 percent.

The government intends to economise nearly 9.4 billion euros ($12.2 billion) next year — compared to a target of 7.8 billion a month ago — with a new cut to state wages, pensions and benefits.

Greece plans to save nearly 4.7 billion euros from pension pay, 1.2 billion euros in civil service salaries and 455 million euros in healthcare.

Overall, state expenses are to be reduced by 33.9 percent in a year.

The document also foresees an annual average unemployment rate of 22.8 percent, a slight dip from the latest measurement of 25.1 percent in July.

The latest forecasts were released as the coalition government faced its first test in parliament to secure the approval of a law to facilitate a long-delayed privatisation drive that is part of its bailout obligations.

Greece plans to raise 2.5 billion euros in asset sales in 2013 according to the budget.

But with the economy still in a deep trough, the state’s tax revenue is in a steady decline.

The budget forecasts a total of 44.3 billion euros in tax takings in 2013, compared to 47 billion in 2012 and nearly 49 billion a year previously.

On the other hand, Greece will need to borrow over 68 billion next year.

And the Greek public debt continues to grow — albeit at a slower rate — despite a major operation last year to alleviate it through a bond write-down.

Next year it will officially exceed 346 billion euros from 340 billion in 2012.