Greece: Economic recovery falters in Q3
December 4, 2017
A provisional dataset released by the Hellenic Statistical Authority (EL.STAT) revealed that the economy decelerated in the third quarter, and the recovery remains modest overall. GDP increased 1.3% over the same period of 2016, below the second quarter’s revised 1.5% increase (previously reported: +0.7% year-on-year). EL.STAT notably revised GDP data for the period from Q1 2014 to Q2 2017, taking into account updated government data and other short-term indicators. The third quarter figure confirms that the economy remains on a recovery path after many painful years; however, the slow pace of expansion will make it difficult to reach the 1.6% growth target for 2017.
Q3’s slowdown was driven by a poor performance by the domestic economy. Private consumption contracted 0.4% annually, the first drop since Q2 2016. Despite gains in the labor market, the unemployment rate remains high and the return of inflation has started to dent household incomes. Fixed investment plunged a notable 8.7%, contrasting Q2’s 1.2% increase. Investment figures in Greece have been very volatile over the past year, not suggesting signs of a sustained recovery. Government consumption also contracted, dropping 2.2% (Q2: -2.1% year-on-year).
Meanwhile, the external sector also showed signs of weakness in Q3. Export growth slowed from a robust 8.7% in Q2 to 4.3% in Q3. High taxation has dampened the competitiveness of export goods; however, tourism revenues remain strong. Import growth also slowed in the third quarter, coming in at 3.7% (Q2: +4.3% yoy), reflecting the weak state of domestic demand.
On a quarter-on-quarter basis, the economy grew 0.3% in Q3 in seasonally-adjusted terms, which was below Q2’s 0.8% increase. The result marked the third consecutive quarter of growth, something the country has not seen in more than a decade. The country finally appears to be on a firm, but slow, path to recovery after years of painful austerity and bailouts.
Greece GDP Forecast
FocusEconomics analysts see GDP growing a moderate 2.0% next year, which is unchanged from last month’s forecast. In 2019, the panel sees growth stable at 2.0%.