Greece: Growth softens at the start of 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.