Greece: Decline in GDP moderates in Q3
GDP contracted 11.7% in annual terms in the third quarter, moderating from Q2’s 14.2% slump, as the lifting of the nationwide lockdown allowed for the gradual resumption of activity.
Q3’s softer downturn was driven by recovering domestic demand, with household spending expanding 1.0% year-on-year in Q3, swinging from Q2’s 12.0% dive. Moreover, public spending bounced back, growing 4.4% in Q3 (Q2: -2.7% yoy) as the government deployed further fiscal stimulus to address the socioeconomic impact of the pandemic. Meanwhile, fixed investment slid 0.3%, contrasting Q2’s 4.6% expansion.
On the external front, exports of goods and services contracted at a more pronounced pace of 44.9% year-on-year in the third quarter (Q2: -33.1% yoy), as still-depressed tourist arrivals weighed on the crucial tourism industry, which accounts for almost a fifth of the country’s GDP. Conversely, imports of goods and services decreased at a softer rate of 6.4% in Q3 (Q2: -12.9% yoy).
On a seasonally-adjusted quarter-on-quarter basis, GDP rebounded 2.3% in Q3, contrasting the previous quarter’s 14.1% fall.
GDP is expected to rebound strongly next year on the back of firming household consumption and supported by new inflows of EU funding. Moreover, the gradual lifting of Covid-19 restrictions at home and abroad should revitalize the tourism industry and bolster the external sector. However, the country’s enormous public debt level and elevated unemployment rate, as well as the banking sector’s high holdings of non-performing loans, remain key downside risks.