Greece's GDP to shrink 20% in case of 'Grexit: S&P
by Daily Sabah
ISTANBULJul 02, 2015 - 12:00 am GMT+3
by Daily Sabah
Jul 02, 2015 12:00 am
International credit rating agency Standard & Poor's (S&P) said Greece would suffer a 20% shrink in real gross domestic product (GDP) and would fall below the baseline within four years if the country left the Eurozone.
S&P issued several scenarios about the possible "Grexit," referring to Greece's exit from the eurozone. S&P believes that Greece's banks and payment system would not be able to operate without the support of the Eurosystem, which represents nearly 70 percent of Greek GDP.
After losing access to financing from the European Central Bank, S&P states that there would be a serious shortage of foreign currency for public and private sectors. In addition, S&P also claimed in its statement that a new Greek currency would depreciate against the euro and cause the value of euro-denominated public and private sector debt to balloon, which would exacerbate the situation.
Iin the case of 'Grexit', unemployment rates in Greece will rise above 29 percent according to the rating agency's report.
While Greece suffers, the rest of the eurozone would be relatively unscathed, said the rating agency. It added that the most significant impact of a "Grexit" would be felt in capital markets, where it would drive up yields, particularly for the more fiscally vulnerable peripheral countries. But, policymakers in Greece and the EU have been expressing that they wanted Greece to remain in the eurozone.
S&P's also suggested that Greece is more likely to vote 'No' in Sunday's referendum over its bailout terms, which could speed up the Greek exit from the eurozone. Greece's PM Alexis Tsipras also said on Wednesday that the government hoped for a deal with creditors-whatever the outcome of the referendum may be.