Citigroup chief economist Willem Buiter is out with a note today detailing the Greek exit from the eurozone he and his team are expecting. He is projecting a 10 per cent drop in Greek GDP next year in the event of a Greek exit and a 20 per cent surge in inflation.
Here he charts these new projections versus his forecasts for GDP and inflation from last month, when he wasn’t calling for an exit with such certainty. The picture isn’t a nice one.
Not only will GDP take a much bigger hit than if Greece were to stay in the euro (according to Buiter), but it doesn’t look like there would be much of a reprieve for the Greeks for a long time.
The charts only project out to 2016, but the level of real GDP stays far below what would be without an exit at least until then (and probably much longer if we extrapolate out this forecast). Inflation likewise appears to linger for a long time at sustained high levels:
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