Greece: GDP records largest contraction on record in Q2
September 3, 2020
Economic activity plunged in the second quarter, with GDP contracting 15.2% year-on-year (Q1: -0.5% yoy), reflecting the impact of the Covid-19 pandemic and associated containment measures. Q2’s reading marked the worst drop on record and largely came in line with market analysts’ expectations.
The downturn was broad-based, with private consumption, public spending, fixed investment and exports all contracting. Household consumption dived 11.6% on an annual basis in Q2, marking the steepest decline since Q1 2011 (Q1: -0.7% yoy). Moreover, fixed investment collapsed 10.3% annually in Q2, marking the worst drop since Q4 2018 (Q1: -6.4% yoy). Meanwhile, public spending declined 3.2% (Q1: +1.4% yoy).
On the external front, exports of goods and services plummeted 32.1% in the second quarter (Q1: +2.4% yoy), marking the first contraction in four years and the worst reading on record. Travel restrictions, which lasted until the beginning of July, dealt a heavy blow to the tourism industry, the powerhouse of the Greek economy. In addition, imports of goods and services contracted at a more pronounced pace of 17.2% in Q2 (Q1: -1.1% yoy).
On a seasonally-adjusted quarter-on-quarter basis, GDP dropped 14.0% in Q2, down from Q1’s 0.7% decrease.
The economy is expected to fall into a deep recession this year as the pandemic and containment measures take their toll. Declining tourism revenues and the resurgence of Covid-19 cases, which prompted the government to reintroduce some restrictions in mid-August, are expected to further weigh on activity in Q3. Meanwhile, the country’s enormous amount of public debt and sour loans burdening the banking system cloud the outlook further.