Greek economy seen shrinking further next year

Employees from the Greek National Organization for Healthcare stand outside the Greek parliament during a rally in central Athens, on Tuesday, Nov. 26, 2013. Hundreds of doctors and employees of the the Greek National Organization for Healthcare protested over mass public sector transfers and lay offs under the government's harsh austerity program. (AP Photo/Petros Giannakouris)

ATHENS, Greece (AP) — A leading international economic body predicted in a report Wednesday that Greece's economy will shrink further next year and that the government might need more financial help.

The Organization for Economic Cooperation and Development said the Greek economy would contract 0.4 percent in 2014, in contrast to the Greek government's forecast for 0.6 percent growth.

However, the OECD did say the economy was improving, and that the recession was expected to come to an end.

"Positive growth is projected only in the course of 2014, reflecting a slower decline of domestic demand and a pickup in exports," it said in its survey.

Greece's economy is contracting for a sixth consecutive year, and the government has been relying on rescue loans from the International Monetary Fund and other European countries since May 2010.

"We are half a decade into the longest, deepest recession that we have known but there is hope on the horizon and 2014 promises to be a turning point for Greece," OECD Secretary General Angel Gurria said during a news conference.

The government has insisted the country will return to growth in 2014, and will post a modest primary surplus — the budget balance without taking into account outstanding interest payments.

"The 2014 budget is the budget of the Greek economy's recovery after six years of recession," Finance Minister Yannis Stournaras said during a speech to Parliament's finance committee Wednesday.

Speaking later at the news conference with Gurria, Stournaras noted he had "some disagreements with the growth projections, given that the general consensus is that we do expect to have growth in 2014, even at a modest rate."

The billions of euros of rescue loans have been contingent on Greece implementing broad structural and fiscal reforms. Successive governments have imposed repeated rounds of austerity measures, including slashing pensions and salaries, and increasing taxes.

While improving certain aspects of the economy, such as the reduction in Greece's annual budget deficit, the reforms have contributed to a sharp drop in living standards and spiraling unemployment, particularly among the young, where the jobless rate is over 60 percent.

"The depression has been much deeper than expected, which has undermined debt sustainability, induced a dramatic rise in unemployment, which affected more than 27 percent of the labor force at mid-2013 and raised social tensions, especially in the first years of the program," the OECD said in its economic survey for Greece.

It said growth was hampered by weak domestic and global demand and difficulty accessing credit.

"Together with the additional adjustment needed on the fiscal side and price competitiveness, the need for further assistance to achieve fiscal sustainability cannot be excluded," the report said.

There was praise, however, for how far Greece has come, with the organization saying the country achieved "a record fiscal consolidation by OECD standards" that managed to reduce the country's massive deficit.