Greece’s economy fell back into recession in the first quarter as a standoff with its international creditors starved the economy of funds.
Gross domestic product contracted 0.2 percent in the three months through March after shrinking 0.4 percent in the previous period, the European Union’s statistics office in Luxembourg said Wednesday. The median estimate in a Bloomberg survey was for a 0.5 percent drop.
“Greek GDP numbers are not disastrous, but the more timely indicators deteriorated much more rapidly since March,” said Michael Michaelides, a fixed-income strategist at Royal Bank of Scotland Group Plc in London. “So we would expect the full costs of the impasse to be reflected in the second-quarter numbers.”
The shrinking economy puts Prime Minister Alexis Tsipras’s government under further pressure to implement measures demanded by its creditors to meet the conditions of a bailout it was elected to overturn. Greek officials expressed optimism about progress toward a deal after a meeting with euro-region finance ministers on May 10, though German Finance Minister Wolfgang Schaeuble said Greece has yet to offer “substance” on reforms.
Liquidity has dried up as the euro area and International Monetary Fund held firm that Greece must adhere to terms agreed by previous governments and withheld loans from the 240 billion-euro ($270 billion) bailout.