Greece: Economy shrinks in first quarter on initial Covid-19 impact
June 4, 2020
GDP shrank 0.9% year-on-year in the first quarter as the Covid-19 outbreak and restrictions to curb its spread started to take their toll, contrasting the 1.0% expansion recorded in the fourth quarter of last year and marking the steepest drop since Q2 2016.
Falling domestic demand led the downturn. Private consumption contracted 0.7% in Q1 as lockdown measures forced consumers to pare back their spending, marking the worst result since Q2 2016 (Q4 2019: +1.3% year-on-year). Moreover, fixed investment plunged 6.4% in Q1, contrasting the 14.0% expansion in the previous quarter. Government spending, meanwhile, rose 2.0% in the quarter, rebounding from the 1.4% drop logged in Q4 2019—cushioning the downturn somewhat.
On the external front, exports of goods and services were resilient, with growth picking up to 2.5% in Q1 (Q4 2019: +0.7% yoy). Additionally, imports of goods and services ticked up 0.2% in Q1 (Q4 2019: -0.3% yoy).
On a seasonally-adjusted quarter-on-quarter basis, the economy contracted 1.6% in Q1, following Q4 2019's 0.7% fall and marking the largest drop since Q3 2015.
The economy is expected to fall into recession this year as the pandemic and lockdown measures take their toll, particularly as the economy’s high dependence on the tourism sector and large share of micro businesses make it more vulnerable to the Covid-19 shock. The country’s enormous pile of public debt and sour loans burdening the banking system cloud the outlook.
Author: Javier Colato, Economist