THE BLOG

Media: Play Fair With Economic Reporting on Greece

12/16/2013 08:43 am ET | Updated Feb 15, 2014

The Greek government is forecasting 0.6% economic growth in 2014, after six straight years of economic contraction.

Ordinarily, 0.6% economic growth would not be great news. But the return of the Greek economy to growth is modestly good news after a torrent of terrible news. Under the European austerity plan imposed on Greece as a condition of remaining in the Euro, the Greek economy has shrunk by a third since 2007, which is similar to the Great Depression contraction of the U.S. economy between the stock market crash of 1929 and the election of FDR.

But the OECD doesn't agree with the Greek government's forecast of modest good news. The OECD says the Greek economy will continue to contract next year, shrinking by 0.4%.

The discrepancy between the Greek government forecast and the OECD forecast could have a big impact if businesses believed the OECD forecast rather than the government forecast.

Suppose you're a business that's thinking of investing in Greece. If you believe the Greek government forecast, maybe you'll be encouraged to go ahead and make your investment, thinking that business is picking up, and your investment is likely to pay off. If you believe the OECD forecast, maybe you'll hold off making your investment, thinking that demand will still be depressed next year, and your investment might fail.

Thus, if businesses believed the more pessimistic OECD forecast, it could become a self-fulfilling prophecy, discouraging businesses from investing in Greece, and slowing economic growth.

Here's how the BBC is reporting the news that the Greek government is forecasting growth for 2014:

Greek lawmakers have passed the 2014 budget, which predicts a return to growth after six straight years of painful recession.

"This is the first decisive step in exiting the bailout," Prime Minister Antonis Samaras said.
[...]
But the OECD says the Greek economy will shrink for another year in 2014.

Here's how AP is reporting the news:

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.

Here's how AFP is reporting it:

Greece will remain mired in recession in 2014 for a seventh straight year, and is likely to need more financial assistance, the OECD said on Wednesday, in contrast to forecasts by Athens.

If you were someone thinking of investing in Greece and you read these articles, what would you think? Maybe you'd think: "Opinion is divided. Who knows what the truth is?" Or maybe you'd think: "The OECD is an independent source of information and likely to be more trustworthy than the Greek government."

But here's a key fact that AP, AFP, and the BBC didn't report: the economic projections of the International Monetary Fund match those of the Greek government, not those of the OECD.

According to the IMF's World Economic Outlook (October 2013), the Greek economy will expand by 0.6% in 2014, just as the Greek government says.

Now, there's certainly no iron law of the universe that the IMF's projections are right. The IMF could be wrong, just like anybody else.

But if the press reported that the IMF's projections match the Greek government's projections, that's a very different story, isn't it? If you were a business thinking of investing in Greece, and you knew that the IMF agreed with the Greek government's projection of a return to growth, wouldn't you be less likely to accept the OECD's claim over the Greek government's claim?

If you think the BBC, AP, and AFP should report that the Greek government's projection of a return to growth in 2014 is supported by the IMF, you can tell them so here.