Greece: Economy grew after all in Q1, revised data shows
June 23, 2017
A complete dataset released on 2 June by the Hellenic Statistical Authority (EL.STAT) revealed that the Greek economy performed much better than previously expected at the start of 2017. GDP increased 0.8% over the same period of 2016, a significant upward revision from the flash estimate of a 0.3% contraction. The improvement was driven by stronger-than-expected private consumption and investment despite a backdrop of austerity measures and political uncertainty. Moreover, the result illustrates that a shaky economic recovery remains underway.
Household spending gained steam in Q1, rising form a 1.2% increase in Q4 2016 to a 1.6% expansion. Although the unemployment rate is notably above the Eurozone average, gains in the labor market have materialized and are slowly boosting economic data. Fixed investment surged 12.8% in Q1, after nosediving 13.5% in the previous quarter. Investment figures have been volatile in recent quarters, largely influenced by the uncertain atmosphere and overall tight financial conditions. Meanwhile, government consumption swung to expansion and rose 1.0%.
The improvement in the domestic economy caused a rise in imports, which soared 19.0% (Q4: -3.3 year-on-year). Export growth inched up from 4.3% in Q4 2016 to 4.4% in Q1. A stabilization in oil prices has helped shore up exports of refined oil products and the country is benefiting from strong tourism earnings.
On a quarterly basis, the economy grew 0.5% in Q1 in seasonally-adjusted terms, which contrasted the 1.1% contraction in Q4. The healthier reading suggests that the economy is slowly embarking on a recovery path, although the overall state is still challenging despite numerous reforms and bailouts.
After months of uncertainty, Greece and its creditors reached a deal on 15 June to unlock over EUR 7 billion in funds from the country’s bailout, removing the risk of a summer default on debt repayments. The deal had been held up for months over a disagreement between Eurozone lenders and the IMF concerning the sustainability of the country’s debt load. The IMF had refused to take part in Greece’s third bailout but will now join as a standby partner, although it will withhold any funds until the Eurozone finance ministers clarify what debt relief measures they will offer Greece. The deal sparked a positive reaction from markets and, on 16 June, Athens’ stock exchange rose to the highest level since June 2015 and the country’s 10-year bond yield fell.