Greece: Growth softens at the start of 2019
June 4, 2019
The economy lost further momentum at the outset of 2019, according to provisional data released by the Greek Statistical Institute (ELSTAT). GDP expanded a meager 1.3% year-on-year in seasonally-adjusted terms in Q1, decelerating from the 1.5% increase recorded in Q4 2018. In quarter-on-quarter terms, however, output still grew 0.2% in Q1, rebounding from the 0.1% contraction logged in Q4, which was the first in two-and-a-half years.
On the domestic front, private consumption slowed yet again, growing a soft 0.8% year-on-year (Q4 2018: +1.1% year-on-year). Years of austerity measures have constrained the purchasing power of households, likely weighing on consumer spending. In addition, government expenditures contracted for the fifth quarter in a row, declining a marked 4.1% year-on-year in Q1 (Q4 2018: -1.4% yoy). Meanwhile, investment activity recovered, rising 7.9% on an annual basis after falling steeply for two consecutive quarters (Q4 2018: -26.5% yoy).
Meanwhile, net trade dragged on growth. Exports of goods and services climbed 4.0% annually, down noticeably from the 10.1% jump recorded in Q4 and the weakest increase in two-and-a-half years amid softer Eurozone demand. Imports, on the other hand, picked up and grew a strong 9.5% year-on-year (Q4 2018: +2.1%) on the back of higher investment activity.
Looking ahead, growth is expected to remain modest this year, largely driven by domestic demand. A set of relief measures implemented this year, which include a hike to the minimum wage, should lend support to household expenditures, while a gradually improving business climate should prop up capital spending. A sharper slowdown in the EU and a banking system still burdened by sour loans cloud the outlook.
Author: Javier Colato, Economist