Greece: Growth picks up in Q2 on stronger public spending and net trade gains
September 4, 2019
The economic recovery gained pace in the second quarter, according to provisional data released by the Greek Statistical Institute (ELSTAT) on 4 September. GDP expanded a modest 1.9% year-on-year in seasonally-adjusted terms in Q2, accelerating from the 1.1% increase recorded in Q1. Similarly, in quarter-on-quarter terms, output grew 0.8% in Q2, well above the 0.2% expansion logged in Q1.
On the domestic front, government expenditures grew a robust 5.3% year-on-year (Q1: -1.4% year-on-year), rebounding back to growth after five consecutive quarters of decline and helping prop up the overall expansion in the quarter. For its part, private consumption fell 0.7% year-on-year (Q1: +0.5% yoy), the first contraction in one-and-a-half years, while fixed investment tumbled 5.8% in annual terms, following the one-off expansion logged in the prior quarter (Q1: +8.3% yoy).
Meanwhile, net trade contributed positively to growth. Exports of goods and services climbed 5.4% annually, party buoyed by the all-important tourism industry, which has become the country’s economic lifeline, and up from the 4.3% rise recorded in Q1. Imports, on the other hand, lost pace and grew 3.7% year-on-year (Q1: +9.8% yoy) amid waning consumer and capital spending at home.
Looking ahead, the recovery is set to continue this year, albeit at a slower pace than in 2018. Gradually rising consumer spending, in part supported by the recent minimum wage hike, and a rebound in capital investment, boosted by improving sentiment, should underpin the expansion. Cooling Eurozone demand and the large stock of non-performing loans on banks’ balance sheets cloud the outlook, however.
Author: Javier Colato, Economist