Greece: Growth slows in the final quarter of 2018
March 7, 2019
According to provisional data released by the Hellenic Statistical Authority (ELSTAT) on 7 March, the Greek economy lost steam in the final stretch of 2018. GDP expanded a modest 1.6% annually in Q4, decelerating from the 2.4% increase recorded in Q3. Notably, output declined 0.1% in quarter-on-quarter terms in Q4, the first quarterly contraction in two-and-a-half years (Q3: +1.0% quarter-on-quarter). For the year as a whole, growth came in at 1.9%, accelerating from the 1.5% expansion logged in 2017.
Waning domestic demand was behind the fourth-quarter moderation. Private consumption slowed markedly, growing a meager 0.5% year-on-year (Q3: +1.7% year-on-year). Austerity measures have constrained the purchasing power of households which, despite gradually declining unemployment and improving consumer confidence throughout the quarter, likely weighed on their expenditures. Meanwhile, fixed investment plunged yet again, falling a steep 25.9% in year-on-year terms (Q3: -22.5% yoy) amid still-weak business confidence. In addition, government spending contracted for the fourth consecutive quarter, declining 1.4% in Q4 (Q3: -4.5% year-on-year).
External sector metrics, however, improved in Q4. Exports of goods and services soared 12.2% annually, up from the 5.7% climb recorded in Q3 and the sharpest increase in three-and-a-half years. The strong reading was partly due to the booming tourism industry, which has become the country’s economic lifeline. Imports, on the other hand, lost steam and grew 6.8% year-on-year (Q3: +16.6% yoy), in part a reflection of weaker domestic demand.
Looking ahead, the economic recovery should broadly hold up momentum this year, propped up by improvements in the business environment and the gradual strengthening of household spending. A still-high proportion of non-performing loans in the banking system and stronger-than-expected slowdown in the Eurozone pose downside risks to the outlook.
Author: Javier Colato, Economist