Greece: Greece's economy improves in Q4, but returns to contraction in 2015
February 29, 2016
Greece’s economy performed better than anticipated in the fourth quarter, revised data that the Hellenic Statistical Authority (EL.STAT) released on 29 February showed. While a previously-released flash estimate indicated that the economy had contracted a significant 2.0% over the same period of the previous year, more detailed data show that significant government consumption and an improvement in investment drove a less-pronounced decline of 0.8%. The result brings full year growth for 2015 to a slight contraction of 0.3% (2014: +0.7%).
Q4’s improvement was driven by a rebound in domestic demand, which had shrunk significantly in Q3. Fixed investment improved from the substantial 11.4% fall in Q3 to a 5.7% annual expansion in Q4. Q3’s drastic drop was attributed to the high degree of uncertainty that plagued Greece’s business climate at the outset of the quarter against a backdrop of capital controls, “Grexit” fears, political instability and tense bailout negotiations. Government consumption also improved in Q4, rising to a 2.8% expansion from Q3’s 0.4% increase and marking the largest expansion since Q3 2009. Private consumption, however, remained depressed and dropped 1.2% in Q4 (Q3: -0.6% year-on-year).
The external sector continued to contribute positively to growth, however, it provided less support than in Q3. Exports deteriorated slightly, contracting 10.4%, which was below the third quarter’s 10.0% fall. Tourism lost steam in the fourth quarter and subdued demand from emerging markets also likely weighed on Greece’s export earnings. In addition, Greece exports a number of refined oil products, the value of which has been hit by the subdued oil price environment. Meanwhile, the drop in imports moderated, falling 11.9% in Q4 after decreasing 20.1% in Q3. Overall the external sector contributed plus 1.4 percentage points to growth in the final quarter of 2015, which was down from plus 2.3 percentage points in Q3.
On a quarterly basis, the economy grew 0.1% in Q4 in seasonally-adjusted terms, which contrasted the 0.6% contracted reported in the preliminary figure. The result suggests that the Greek economy is doing better than previously expected although it remains in a feeble state.