Greece: Economy surges in Q3, grows at fastest pace since Q1 2008
November 29, 2016
Greece’s economy returned to growth in the third quarter and recorded the best result in over five years. According to more complete data released on 29 November by the Hellenic Statistical Authority (EL.STAT), GDP expanded 1.6% over the same period last year, beating a 1.2% flash estimate released on 14 November (Q2: -0.4% year-on-year). The turnaround was driven by an almost across-the-board improvement, with only fixed investment growth deteriorating from Q2.
Domestic conditions improved notably in the third quarter as private consumption growth surged to the best result since Q1 2007. Despite an environment of austerity, a gradual improvement in the labor market and low basis of comparison fueled household consumption, which expanded 5.7% in Q3, a notable improvement from Q2’s 0.8% contraction. Government spending continued to fall as the government tries to return to a sustainable fiscal stance and fulfill creditor demands. Government consumption contracted 0.6% (Q2: -0.9% yoy). Fixed investment continued to grow at double-digit rates and expanded 14.8%, although this was a slightly slower pace than Q2’s 17.2%.
The external sector’s contribution to overall economic growth improved as exports rebounded into positive territory. Exports grew 8.5%, contrasting the 2.4% contraction in Q2. Greece exports a number of refined oil products and the recent stabilization in oil prices is helping to support their value. In addition, strong tourism earnings this year have boosted services exports. Import growth also gained steam, rising from 4.9% to 12.2% in Q3. Overall, the external sector contributed minus 1.0 percentage points to growth in the third quarter of 2016, which contrasted the plus 0.1 percentage points recorded in Q2.
On a quarterly basis, the economy grew 0.8% in Q3 in seasonally-adjusted terms, which followed the 0.4% increase in the second quarter and was better than the 0.5% increase reported in the preliminary estimate. The positive GDP figure suggests that the economy has embarked on a recovery phase and should return to growth next year. However, a number of structural issues still persist along with the country’s unsustainable high debt load.