Greece: Growth wanes in Q3 on weak domestic demand
December 5, 2019
The economic recovery lost pace in the third quarter, according to provisional data released by the Greek Statistical Institute (ELSTAT) on 5 December. GDP expanded 2.3% year-on-year in seasonally-adjusted terms in Q3, moderating from the 2.8% increase recorded in Q2. Similarly, in quarter-on-quarter terms, output grew 0.6% in Q3, more than half the 1.3% expansion logged in Q2.
The third-quarter slowdown was driven by weak domestic demand, which contracted for the first time in over a year. Government expenditures declined 0.5% year-on-year, after surging 9.4% in the second quarter. And although fixed investment rebounded modestly (Q3: +2.0% year-on-year; Q2: -6.1% yoy), a marked draw down in inventories dragged on the overall expansion. For its part, private consumption barely rose in the third quarter (Q3: +0.2% yoy; Q2: -0.3% yoy), although also rebounded from the second quarter amid a notable improvement in consumer confidence.
Meanwhile, net trade was the bright spot of the report, underpinning growth in the third quarter despite the subdued global economic environment. Exports of goods and services soared 9.5% annually, buoyed in large part by the all-important tourism industry which has become the economy’s lifeline, and well above the 5.8% jump recorded in Q2. Imports, on the other hand, fell 2.9% on an annual basis (Q2: +3.7% yoy) amid lackluster consumer and capital spending at home.
Looking ahead, the economy is poised to gain modest steam next year as the recovery strengthens. Household spending is seen picking up traction amid labor market improvements, while investment should remain healthy thanks to improving business confidence. That said, risks lurk from increased competition to the vital tourism industry and a soft Eurozone economy.
Author: Javier Colato, Economist