Greece: Economy grows at fastest pace since Q3 2007 on strong exports
June 4, 2018
According to provisional data released by the Hellenic Statistical Authority (EL.STAT), the Greek economy started 2018 on strong footing, growing at the strongest rate since the third quarter of 2007. GDP expanded 2.4% annually in Q1, up from 1.8% in Q4 2017. The print signals a positive start to 2018, with the economy supported by healthy external demand and a recovering labor market.
The robust acceleration was driven by the external sector. Export growth sped up to 9.5% year-on-year in Q1, from 5.7% in Q4. Growth in exports is being buoyed by a robust tourism industry, which has benefitted from reform measures to improve competitiveness, as well as economic conditions that are suppressing prices. In contrast, import growth contracted 2.7% in the first quarter (Q4: +5.0% year-on-year), which was likely caused by a fall in investment.
Meanwhile, the domestic economy’s performance was uneven in Q1. Fixed investment swung to the downside, contracting 9.9% in annual terms, contrasting Q4’s robust 25.2% expansion. The contraction was partly due to a strong base effect from a double-digit expansion in the same quarter a year prior. Private consumption, on the other hand, rebounded and grew at a one-year high of 1.3% in Q1 (Q4: -1.3% yoy). Government spending, meanwhile, eased to 0.2% growth (Q4: +2.1% yoy). All told, overall consumption expenditure recovered in the quarter.
On a quarter-on-quarter basis, the economy expanded 0.8% in Q1 in seasonally-adjusted terms, which was above Q4’s revised 0.2% increase (previously reported: +0.1% quarter-on-quarter) and the highest reading since Q2 2017. The print represented the fifth quarter of expansion in succession, suggesting a gradual recovery has taken hold.
Economic growth moving forward partially hinges on a smooth exit from the bailout program when it expires in August. Greece appears to be in a good position to do so, with favorable results from the banking sector stress tests and a better-than-expected primary surplus in Q1. Moreover, the economic recovery should gain momentum as investment returns to growth amid higher sentiment and improved financial conditions. Private consumption should also rise modestly as conditions in the labor market improve.
Author: Lindsey Ice, Economist