Country Economic Forecasts > Greece

After lengthy negotiations, Greece won a new three-yearadjustment programme in August offering 86bn of new financing. Under this deal,Greece is required to legislate an extensive list of prior actions, in somecases reversing policy changes implemented by the Syriza government. Greece wasdeemed to be broadly in compliance with the list of prior actions and, as aresult, was granted a first tranche of 13bn under a third bailout to cover itsimmediate financing needs and enabling repayment of the overdraft from the EFSMon 20 July. The extended period of negotiations and resulting uncertainty hasbeen exceptionally damaging for the economy, and the problems may beexacerbated by the calling of fresh elections later this month. But GDPactually rose 0.9% on the quarter in Q2 as households ran down their US$-denominatedsavings in anticipation of a possible Greek euro exit. This will see lower consumptionin H2 this year. Added to this, the capital controls imposed in July will havean extremely negative impact on economic activity. As a result, we forecast asharp fall in GDP in H2, resulting in GDP declining by 0.5% this year and then fallsof 3.7% in 2016 and 1.7% in 2017, before a very modest recovery begins in 2018.